What is a workplace retirement plan?
It is estimated that most of the retirement income for U.S. workers will come from what they have saved through their employer-sponsored savings plan. Here’s how it works: you contribute part of your income into one of these retirement plans, then you manage the growth of that money federal income tax-deferred by purchasing investments such as mutual funds, stocks, bonds and ETFs through the plan. In addition, many plans also allow your employer to make optional contributions.
How to choose the right plan for you.
The 401(k), the 403(b) and the 457 plans are similar — your employer offers the one designed for your type of organization. If you are self-employed, a small-business owner, or the employee of a small business, a SEP plan or a SIMPLE IRA are alternative ways to set aside money income tax-deferred for retirement. In some cases, only your employer (not you) can contribute to a 401(a). All plans let you contribute additional money into your own Traditional IRA or Roth IRA. However, If you are an active participant in a plan, your contribution to an IRA may be limited.
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The information herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
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