Retirement Planning Suze

A qualified retirement plan is what large companies usually offer to their employees. As defined by section 401 of the U.S. Tax Code, qualified plans were created as a tax incentive for employers to contribute to employee retirement plans. Every year, your employer is allowed to deduct from company taxes certain contributions it makes to the plan on your behalf.

Entries marked with a Q are qualified plans, which means that employers can receive a tax break for their contributions to these plans. Defined Benefit Plan—Q Target Benefit Plan—Q Defined Contribution Plan—Q Profit-Sharing Plan—Q Money-Purchase Pension Plan—Q Stock Bonus Plan—Q 457 Plan 401(k)—Q Roth 401(k)—Q 403(b) TSA Traditional IRA Roth IRA Converted Roth IRA Rollover IRA Simple IRA Sep-IR A Keogh Plan—Q

A qualified retirement plan is what large companies usually offer to their employees. As defined by section 401 of the U.S. Tax Code, qualified plans were created as a tax incentive for employers to contribute to employee retirement plans. Every year, your employer is allowed to deduct from company taxes certain contributions it makes to the plan on your behalf.

The advantage as an employee is that your contributions in a qualified plan are made with pretax dollars from your paycheck. You are not only investing your money for the future, but you are also using a percentage of money that otherwise would have gone to Uncle Sam. Your pretax dollars grow tax-deferred—you don’t have to pay any income taxes on your contributions or your investment gains until funds are withdrawn from the plan at retirement. This is also true of other retirement-savings vehicles, such as a traditional IRA. Another advantage is that many employers match part or all of employee contributions. Qualified plans also qualify for special taxation rules such as ten-year averaging and capital-gains tax. The most comforting feature of a qualified plan is that it is protected against claims by your employer’s creditors. Your money is held in trust for you and should be relatively safe.