Your earnings grow tax-deferred until withdrawn. You may qualify for a tax deduction on contributions if you are within certain household income limits.
Businesses with 100 or fewer employees, including state and local governments and tax-exempt organizations, are eligible for SIMPLE IRAs. A tax-deferred retirement plan designed specifically for small businesses.
A SEP IRA is an easy, low-cost way for self-employed people and small business small-business owners to save for retirement on a tax-deferred basis.
Contributions from the employer can vary or not be made at all, depending on profitability, cash flow or other factors. No participant contributions are allowed.
Any employer, except government entities, can offer a 401(k) plan. Each employee participating in the plan determines how much money is to be automatically contributed from each paycheck. Generally, participants can invest an annual maximum of $18,000 in 2017, or $24,000 for those 50 or older.
A 403(b) is a tax-favored retirement plan similar to a 401(k) plan, but designed for employees of school systems, nonprofit hospitals, religious organizations and other tax-exempt employers.
Payroll deduction IRAs may be the simplest way workers can save for retirement. Employees set up a traditional or Roth IRA on their own, and then let the employer know how much they’d like to contribute from each paycheck.
For business owners who wish to contribute enough money each year to provide a specific benefit upon retirement. This may be beneficial to older employees with a high, stable income who need a rapid accumulation of assets over a short period of time.
A profit-sharing plan, also known as a deferred profit-sharing plan or DPSP, is a plan that gives employees a share in the profits of a company. Under this type of plan, an employee receives a percentage of a company's profits based on its quarterly or annual earnings.
College savings plans, and prepaid tuition plans may offer tax advantages and, in some cases, the ability to pay in installments over a longer period of time. Note, monies from a 529 plan must be applied to qualified higher educational expenses related to college; otherwise, there could be adverse tax consequences to nonqualified withdrawals. Additionally, there could be state tax benefits for investing in your in-state 529 plan, if your state sponsors one.
With Coverdell Education Savings Accounts (formerly known as Educational IRAs), you can make contributions for each child, until he or she is 18.
Money contributed to a Coverdell Education Savings Account may grow, tax-deferred, and may be withdrawn—free from federal income taxes—for any qualified higher educational expense incurred by the child before age 30. After that time, any remaining balance must be distributed to the beneficiary. Any gains will be taxed as ordinary income and will incur a 10% penalty tax. State taxes may also apply. The account owner can retain control of the money in the account, if desired. The beneficiary can even be renamed in some cases. Check the IRS website for current contribution limits.
These custodial accounts, which are named for the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA), let investors take advantage of the lower tax rate for children while saving for education. Check the IRS website for current contribution limits. Check with your tax advisor, prior to making any decisions.
** The term "Keogh" or "HR-10" describes any type of retirement plan established by an nincorporated business - whether it be a profit sharing, money purchase or defined benefit plan.