Retirement Planning: Retirement, Pension and Profit Sharing Plans
Retirement Accounts (IRAs), pension plans and profit sharing plans are designed to prepare individuals for retirement and to defer income taxation. More and more individuals and business owners direct significant wealth into IRA accounts and other tax qualified retirement plans. Most states allow these type assets to be creditor exempt. One of the most highly used tools for retirement planning is the Individual Retirement Arrangement (IRA). The IRA is a form of retirement plan that provides tax and other advantages for retirement savings in the United States. IRA's come in various types including; Traditional IRA, Roth IRA, SEP IRA, Simple IRA and Self-Directed IRA. Other popular retirement planning tools plans that may be exempt (depending on state exemption statutes) include pension plans, profit sharing, 401(k) plans, and Keogh Plans.
- Pension: A pension is a contract for a fixed sum to be paid regularly to a person, typically following Retirement plans may be set up by employers, insurance companies, the government or other institutions such as employer associations or trade unions.
- Profit Sharing Plan: This includes any incentive plans provided by businesses to employees for direct or indirect payments based on a company's profitability or other pre-determined sharing rule. These can also be added to retirement plans – and are often used in combination with 401(k) Plans.
- 401K Retirement Contribution Plan: A 401(k) plan is defined as contribution plans with annual contributions limited (currently to $17,000). Contributions are "tax-deferred"—deducted from paychecks before taxes and then taxed when a withdrawal is made from the 401(k) account later on. Depending on the employer's program a portion of the employee's contribution may be matched by the employer.
- Traditional "Regular" IRA: The Traditional IRA is held at a custodian institution such as a bank or brokerage, and may be invested in anything that the custodian allows. The only criterion for being eligible to contribute to a Traditional IRA is sufficient income to make the contribution, however, the Traditional IRA has more restrictions on withdrawals.
- Roth IRA: The Roth IRA is a special type of retirement plan under US law that is generally not taxed, provided certain conditions are met. The Roth IRA's principal difference from most other tax-advantaged retirement plans is that, rather than granting a tax break for money placed into the plan, the tax break is granted on the money withdrawn from the plan during retirement. The Roth IRA's principal difference from most other tax-advantaged retirement plans is that, rather than granting a tax break for money placed into the plan, the tax break is granted on the money withdrawn from the plan during retirement. Also, there are fewer restrictions on the investments that can be made in the plan than other similar type plans.
- SEP IRA: Simplified Employee Pension Individual Retirement Arrangements (SEP IRA) are usually adopted by business owners to provide retirement benefits for themselves and their employees. The funds within the SEP accounts can be invested in the same way as any other IRA.
- SELF DIRECTED IRA A Self-Directed Individual Retirement Arrangement is an IRA where a custodian or trustee holds the IRA assets on behalf of the IRA owner. The trustee/custodian will usually maintain all assets and keep all paperwork regarding them; including filing IRS reports and issuing client statements. The trustee/custodian will also help the IRA owner understand the rules and regulations of investing and offer them various investment options (stocks, bonds, and mutual funds usually – with other types of investments sometimes).
- SIMPLE IRA Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA) is a tax-deferred employer-provided retirement plans that allows employees to set aside money they earn. The money that is set aside is allowed to be invested– so that the employee can grow the SIMPLE IRA for their retirement. SIMPLE IRAs bear similarities to the more well known 401K retirement plans.
- Keogh Plan: Keogh Plans are retirement plans for self employed people and small businesses. Funds in the plan can be invested (in stocks, bonds, mutual funds, and other acceptable financial outlets). The main benefit of this plan over others is that it has a higher contribution limit for some individuals.
Yes, You Can Lose Everything!
You may think that your wealth is safe and that you don't need protection. But don't delude yourself and accept reality — for every 60 minutes you spend making money, spend 60 seconds thinking about how to protect it!