Types of Retirement Accounts

IRA Retirement Plans

IRAs (Individual Retirement Arrangements)

An IRA (traditional) is an individual retirement account that allows you to save cash and other financial assets while providing federal and state tax breaks as you contribute to your account. When you make a withdrawal, that money will typically be taxed.

 

Roth IRAs

A Roth IRA is an individual retirement account that is taxed on contributions but is usually untaxed on any earnings or withdrawals.

 

SIMPLE IRA (Savings Incentive Match Plan for Employees Individual Retirement Account)

A SIMPLE IRA is a retirement plan set up by an employer that allows you to set aside money and invest it to grow for retirement. This money will be taxed upon withdrawal.

 

Payroll Deduction IRAs

Through payroll deduction, you can set up a traditional or Roth IRA on your own, and then let your employer know how much you would like to contribute from each paycheck.


 

Governmental Retirement Plans

If you work for a federal, state, local, or Indian tribal government entity, you may qualify for these types of plans. Governmental plans are usually 401 (a), but can include some 401 (k), 403 (b), and 457 plans.

 

401 (a)

Under a 401 (a) plan, your employer (usually the government) contributes to your retirement, but also defines the amount and frequency of your mandatory contributions.

 

401 (k)

A 401 (k) is an employer-supported retirement savings plan that allows you to contribute a portion of your paycheck before taxes to save and invest. There are usually no taxes paid until you make a withdrawal.

 

403 (b)

A 403 (b) is a retirement savings plan available to you if you work for certain public education organizations, nonprofit employers, and other qualified entities. These plans offer additional tax advantages due to the nature of your service.

 

457 Plans

If you work for the government (or a qualified non-government entities), you may be eligible for a 457 plan, which is a supplemental retirement savings plan similar to a 401 (k).


 

Other Types of Retirement Plans

 

Simplified Employee Pension (SEP) Plan 

An SEP is a type of Individual Retirement Account (IRA) business owners can set up for themselves and their employees. If you own a small business, this may be a more cost-effective option for you.

 

Salary Reduction Simplified Employee Pension (SARSEP) Plan

A plan offered by small companies (typically those with fewer than 25 employees) that allows you to make pre-tax contributions to your Individual Retirement Accounts (IRAs) through salary reduction.

 

Profit-Sharing Plans

Under a profit-sharing plan, your employer can help you save for retirement by contributing a portion of their profits to your retirement account. That means your employer can decide from year to year how much to contribute (or whether to contribute at all) to your plan.

 

Defined Benefit Plans

A defined benefit plan is a pension arrangement in which the pension payments you receive are based on your years of service and salary at the time of your retirement.

 

Money Purchase Plans 

A money purchase plan is an arrangement in which your employer is required to contribute a specific amount to your retirement account each year. The amount your employer is required to contribute is outlined in the plan documents and is usually a percentage of your salary.

 

Employee Stock Ownership Plans

In order to incentivize you to invest in their company, your employer may allow you to buy shares of their stock. Under these plans, the IRS may offer you tax breaks or your employer may you offer you a discount on shares.