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403b Plan

A 403(b) plan (tax-sheltered annuity plan or TSA) is a retirement plan offered by public schools and certain charities. It works in the same way as a 401(k) plan that you would find with a for-profit company. Lik a 401(k), a 403(b) plan lets employees move some of their salary into individual retirement accounts. Usually, this portion of the salary that is deferred is generally not subject to federal or state income tax until it has been distributed. However, a 403(b) plan may also offer Roth accounts. Normally, any contributions to Roth acounts are taxed normally, but they are tax-free, including any earnings and gains when they are distributed. Check out our 403 (b) FAQs Page for more information on this tax savings retirement account.

Here Is A Video About 403(b) Plans

Eligible employers are generally:

  • Public schools, colleges, or universities,
  • Churches
  • Charitable entities that are tax-exempt under Section 501(c)(3) of the IRS Code

 

457 Deferred Compensation Plans

Plans of deferred compensation described in IRC section 457 are available for certain state and local governments and non-governmental entities tax exempt under IRC 501. They can be either eligible plans under IRC 457(b) or ineligible plans under IRC 457(f). Plans eligible under 457(b) allow employees of sponsoring organizations to defer income taxation on retirement savings into future years. Ineligible plans may trigger different tax treatment under IRC 457(f).

 

401k Plans

A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account.

401(k) plans, named for the section of the tax code that governs them, arose during the 1980s as a supplement to pensions. Most employers used to offer pension funds. Pension funds were managed by the employer and they paid out a steady income over the course of the retirement. (If you have a government job or a strong union, you may might still be eligible for a pension.) But as the cost of running pensions escalated, employers started replacing them with 401(k)s.

With a 401(k), you control how your money is invested. Most plans offer a spread of mutual funds composed of stocks, bonds, and money market investments. The most popular option tends to be target-date funds, a combination of stocks and bonds that gradually become more conservative as you reach retirement. - From WSJ

 

Traditional and Roth IRAs

Traditional and Roth IRAs allow you to save money for retirement. This chart highlights some of their similarities and differences.

Features Traditional IRA Roth IRA
Who can contribute? You can contribute if you (or your spouse if filing jointly) have taxable compensation but not after you are age 70½ or older. You can contribute at any age if you (or your spouse if filing jointly) have taxable compensation and your modified adjusted gross income is below certain amounts (see 2014 and 2015 limits).
Are my contributions deductible? You can deduct your contributions if you qualify. Your contributions aren’t deductible.
How much can I contribute? The most you can contribute to all of your traditional and Roth IRAs is the smaller of:
  • $5,500 (for 2014 and 2015), or $6,500 if you’re age 50 or older by the end of the year; or
  • Your taxable compensation for the year.
What is the deadline to make contributions? Your tax return filing deadline (not including extensions). For example, you have until April 15, 2015, to make your 2014 contribution.
When can I withdraw money? You can withdraw money anytime.
Do I have to take required minimum distributions? You must start taking distributions by April 1 following the year in which you turn age 70½ and by December 31 of later years. Not required if you are the original owner.
Are my withdrawals and distributions taxable? Any deductible contributions and earnings you withdraw or that are distributed from your traditional IRA are taxable. Also, if you are under age 59 ½ you may have to pay an additional 10% tax for early withdrawals unless you qualify for an exception. None if it’s a qualified distribution (or a withdrawal that is a qualified distribution). Otherwise, part of the distribution or withdrawal may be taxable. If you are under age 59 ½, you may also have to pay an additional 10% tax for early withdrawals unless you qualify for an exception.

 

To learn more about the above retirement plans, please Contact Us

 

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