Retirement Plans
401K-is a feature of a qualified profit-sharing plan that allows employees and or employers to contribute a portion of their wages to individual accounts. Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals). Distributions, including earnings, could be included in taxable income at retirement (except for qualified distributions of designated Roth accounts).
403B– tax-sheltered annuity (TSA) plan is a retirement plan, similar to a 401(k) plan, offered by public schools and certain 501(c) (3) tax-exempt organizations. An individual may only obtain a 403(b) annuity under an employer’s TSA plan.
457-Plans of deferred compensation are available for certain state and local governments and non-governmental entities tax exempt under IRC 501. They can be either eligible plans under IRC 457(b) or ineligible plans under IRC 457(f). Plans eligible under 457(b) allow employees of sponsoring organizations to defer income taxation on retirement savings into future years. Ineligible plans may trigger different tax treatment under IRC 457(f).
409A-applies to compensation that workers earn in one year, but that is paid in a future year. This is referred to as non-qualified deferred compensation. This is different from deferred compensation in the form of elective deferrals to qualified plans (such as a 401(k) plan) or to a 403(b) or 457(b) plan.
Traditional IRA-tax deductible individual retirement account that has strict eligibility requirements based on income, filing status, and availability of other retirement plans (mandated by the Internal Revenue Service). Transactions in the account, including interest, dividends, and capital gains, are not subject to tax while still in the account, but upon withdrawal from the account, withdrawals are subject to federal income tax (see below for details).
Roth IRA-is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA.
-You cannot deduct contributions to a Roth IRA.
-Qualified distributions are tax-free.
-You can make contributions to your Roth IRA after you reach age 70 ½.
-You can leave amounts in your Roth IRA as long as you live.
SEP IRA-A SEP plan allows employers to contribute to traditional IRAs (SEP-IRAs) set up for employees. A business of any size, even self-employed, can establish a SEP.
Simple IRA Plan– (Savings Incentive Match Plan for Employees) allows employees and employers to contribute to traditional IRAs set up for employees. It is ideally suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.
Just wanted to give my readers a brief description and to list the many options we all have to contribute to a retirement plan. At any stage currently in your life you can make contributions to one of these plans depending on how you are employed even self-employed people have options. Also you can effectively reduce your taxes by contributing to one of these plans which is a win-win situation for anybody. Leave a comment to notify us if you agree or disagree with contributing to these plans. In addition to this if you would actually contribute to more than 1 plan to help you boost your retirement accounts? See IRS.gov for further details on these specific plans.
The picture above is your view after 25 years of contributing to one of these plans.
As always do not forget to Watch your Money!
