Retirement Plans It's easy to put off planning for retirement, especially if the event is many years away. But the earlier you start planning, the longer and more enjoyable your retirement may be. Through a selection of IRAs, SEPs and SIMPLE Plans; you can choose a plan that can help meet your retirement needs while investing in stocks, bonds, mutual funds, money markets or government securities.

401(k) Plans

A qualified retirement plan is an employer-sponsored retirement plan that qualifies for special tax treatment under Section 401(a) of the Internal Revenue Code.

There are various types of 401(k) qualified plans, but they all fall into two categories:

1. A defined benefit plan (e.g., a traditional pension plan), which is funded by employer contributions and provides the plan holder with a specified level of retirement benefits.

2. A defined contribution plan (e.g., a profit-sharing or 401(k) plan), which is funded by employer and/or employee contributions. The benefits received depend on investment performance.

Individual Retirement Accounts

Traditional IRA

• Tax deductible contributions (depending on income level)
• Withdraws begin at age 59 1/2 and are mandatory by 70 1/2.
• Taxes are paid on earnings when withdrawn from the IRA
• Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits, etc.)
• Available to everyone; no income restrictions
• All funds withdrawn (including principal contributions) before 59 1/2 are subject to a 10% penalty (subject to exception).

Roth IRA

The traditional IRA was essentially the only choice until the late 90s, when Congress passed the Taxpayer Relief Act of 1997, at which time the Roth IRA was created.

• Contributions are not tax deductible
• No Mandatory Distribution Age
• All earnings and principal are 100% tax free if rules and regulations are followed
• Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits, etc.)
• Available only to single-filers making up to $95,000 or married couples making a combined maximum of $150,000 annually.
• Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).

Simplified Employee Pension Individual Retirement Accounts (SEP IRAs)

A variation of the IRA. SEP IRAs are used by business owners to provide retirement benefits for them and their employees. There are no significant administration costs for self-employed person with no employees. If the self-employed person does have employees, all employees must receive the same benefits under an SEP plan. Since SEP accounts are treated as IRAs, funds can be invested the same way as any other IRA.

Savings Incentive Match Plans for Employees (SIMPLE IRA)

Considered a group retirement plan. They are easier to set up and maintain than 401(k) or pension plans, but they offer lower contribution limits than other group plans. SIMPLE IRAs allow for pre-tax dollars to be contributed, with matching from the employer. Distributions are taxed as ordinary income, and there are penalties for early distributions.