Here's Why You Should Have a Savings Plus Account!

Planning for retirement isn’t always easy. Often, you’ll have a few account options available to you. Thus, deciding which approaches are the best fit can be challenging. One of those options might be a Savings Plus account. If you’re trying to determine if a Savings Plus account is right for you. Here’s what you need to know.

What Is a Savings Plus Account?

While the program name may lead you to believe that this type of savings account is a version of a traditional savings account, it isn’t. A Savings Plus account is actually a voluntary retirement account option. It gives eligible employees the ability to supplement their other retirement savings activities.

How a Savings Plus Account Works

A Savings Plus account is a long-term savings option designed to help people set money aside for retirement. Like many other employer-sponsored retirement vehicles. Those who participate can fund their Savings Plus account through payroll withdrawals.

With this program, participants can use the traditional (pre-tax) or Roth (post-tax) approach, allowing them to choose a path that gives them the best tax benefits for their unique situation. Additionally, there are several plan options available.

The most widely used are the 401(k) and 457(b) plans. Like many retirement plans, the money is meant to stay in the account until a person reaches retirement age, usually at least 59 ½ years old, though potentially as low as age 50 depending on the person’s employment status.

Barring a few exceptions, early withdrawals typically trigger penalties. Which exceptions apply depends on the person’s employment status, the account type, and the reason for the withdrawal.

There is also an Alternate Retirement Program (ARP) and a Part-Time, Seasonal and Temporary (PST) Employees Retirement Program. The latter two options aren’t as broadly available, though they may be solid options for those who qualify.

In any of the cases above, IRS contribution limits can apply. Those who use the program should review the annual contribution limits – which are get a yearly update – to determine the maximum amount they can save across their retirement accounts.

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Who Can Open a Account?

These accounts are available to employees of the State of California. This includes many government agencies as well as educational institutions in the state.

Should You Have This Type of Account?

If you are eligible for a Savings Plus account, it’s wise to explore the option. If you’ve otherwise maximized your retirement savings through your job and aren’t hitting the IRS contribution limit each year. These programs could be a reliable way to save more for retirement.

However, there are other options available, as well. For example, some may feel that a traditional or Roth IRA is a better fit. In some cases, independent investing might be a better match. Especially if you want the ability to make withdrawals at any time without a penalty.

Ultimately, it’s best to reflect on your needs and goals. That way, you can find the account option that’s genuinely right for you.

Do you think it’s a good idea to have a savings plus account? Why or why not? Share your thoughts in the comments below.

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. Check out these helpful tools to help you save more. For investing advice, visit The Motley Fool.

Tamila McDonald

Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.