Retirement plans

Do you want to save your hard-earned money for your future?

There are various tax-favored plans to help working people save for retirement. In USA there are different types of retirement plans - including 401(k)s and other profit-sharing plans, Keoghs, IRAs and tax-deferred annuities.

As Twila Slesnick says, every retirement plan fits into one of four broad categories:

• qualified plan;
• Individual Retirement Accounts (IRA);
• plan which is neither an IRA nor a qualified plan, but which has many of the characteristics of a qualified plan;
• plan which is neither an IRA nor a qualified plan, and which does not have the characteristics of a qualified plan.

In 1978, Congress amended the Internal Revenue Code to add section 401(k). Originally intended for executives, section 401(k) plans proved popular with workers at all levels because it had higher yearly contribution limits than the Individual Retirement Account (IRA). It provided greater flexibility in some ways than the IRA, often providing loans and, if applicable, offered the employer's stock as an investment choice.

Traditional 401(k) plan is for any type or size company. Funded by employee elective deferrals and optional employer matching.

403(b) plan is for any non-profit business, government entity, or educational institution. Funded by employee elective deferrals and optional employer matching.

Simple IRA plan is for small businesses with 100 employees or fewer. Funded by mandatory employer and optional employee contributions.

Keogh plan is for law partnerships, medical practices, and family businesses with 10 or fewer highly paid employees. Funded by employee and employer contributions.