Most Americans realize the importance of saving for the golden years of retirement. While Social Security benefits will help, individual retirement plans are commonly used as a tax-advantaged way to supplement those funds. Although there are many retirement plans available, many require contributions from both employee and employer. In addition, managing the tax requirements on many of the plans can be quite complex. Since families don’t have a “benefits department” to establish and manage retirement plans, we recommend plans that are easy to set up and administer. Below are two excellent options:

• Traditional IRA: Employees can contribute up to $5,000 (2011) of their salary per year to a Traditional IRA. Contributions are tax-deferred, meaning that the contributions are not subject to certain payroll taxes and are taxed when withdrawn at retirement. Contributions to a Traditional IRA may also be tax-deductible each April via Form 1040 (federal income tax return). Employers are not eligible to contribute to Traditional IRAs. These plans are very “portable” as they are not dependent on administration by or contribution from the employer.

• Roth IRA: Employees, employers or both may contribute up to $5,000 per year (2011) to a Roth IRA. Contributions are not tax-deferred, meaning that contributions are made using after-tax income and, therefore, there are no taxes when funds are withdrawn at retirement. This plan gives employees the flexibility to contribute solely or to involve their employers in the retirement plan contributions.

Here are two additional options. They are not recommended because they are more complex to set up and manage:

• SIMPLE IRA (Savings Incentive Match Plan for Employees): This plan allows employees to contribute up to $11,500 (2011) per year and requires employers to make matching contributions of up to 3 percent of their employee’s pay. Contributions to a SIMPLE IRA are tax-deferred, meaning that the contributions are not subject to certain payroll taxes and are taxed when withdrawn at retirement.

• 401(k) Plans: A 401(k) allows employees to contribute a portion of pre-tax salary into a tax-deferred, interest-bearing retirement account. In some cases, employers can agree to match each dollar that employees contribute to the account and receive a tax deduction on their contributions. Please know that this option may not be available to you since 401(k) plans are generally restricted to commercial enterprises.

Although you can establish a retirement plan online, it is not recommended unless you have a strong working knowledge of retirement plans. We recommend that you rely on financial brokers who are trained in this area. Since they are paid by the bank or investment company they work for, it won’t cost you anything. More importantly, these professionals can help you choose wisely and then establish and manage the plan for you.