Retirement plan

Is putting all retirement savings in a tax deferred account the best choice for everyone? Use info given below and other resources if you want.

Individual and Employee Sponsored Accounts

Employer Sponsored Retirement Accounts
SEP IRA Simplified Employee Pension plans
Available to any employer or sole proprietor, though suited for smaller businesses, a SEP offers many of the tax benefits of the qualified

plans — with fewer administrative expenses.
• SEP contributions are discretionary and can be up to 25% of pay for each eligible employee.
• Participant contributions are not allowed.
• All employer contributions are made to IRAs for the benefit of the eligible employees and are 100% immediately vested.
• Contributions and earnings grow tax-deferred until the money is withdrawn by the participant.
• Employer contributions are deductible business expenses.
• Plans are easy to set up and administer, with minimum paperwork and no complex IRS reporting requirements.
SIMPLE IRAs Savings Incentive Match Plans for Employees
A SIMPLE IRA is a retirement plan for small businesses with fewer than 100 employees.
• The company must either match participant contributions (dollar for dollar up to 3% of pay) or make a contribution of 2% of pay

for all eligible participants.
• Contributions are 100% immediately vested.
• Certain notices must be provided annually to eligible employees.
• Employer match is a tax-deductible business expense.
• Plans are low cost, and easy to set up and administer with no complex IRS reporting requirements.
401(k) plans
A 401(k) plan allows employees to contribute a portion of their pretax salary to a tax-deferred retirement plan. Some plans may offer a Roth

option, in which case employees’ Roth contributions are taxed upfront; these contributions grow tax-deferred and are tax and penalty free when

taken in a qualified withdrawal.
• Some companies provide a matching contribution as an extra incentive for the participants to contribute.
• In-service distributions for certain hardships can be allowed, or participants can take in-service distributions starting at

age 59–1/2.
• Participant deferrals do not count toward the deductible limits.
• Matching contributions may be subjected to a vesting schedule. Both participant and employer-matching contributions are subject

to discrimination testing.
• Employer contributions and match (if any) are deductible business expenses.
If you’re self-employed, a Solo 401(k) is an option. It offers many of the same advantages of a 401(k), including flexible contributions and

the ability to take loans. Plus, setup costs are low and it can cover you and a spouse.
403(b) plans
A 403(b) is a tax-favored retirement plan for employees of school systems, nonprofit hospitals, religious organizations and other tax-exempt

employers [known as 501(c)(3) organizations].
• Participants can make pretax or Roth contributions and some organizations match these contributions.
• Similar to a 401(k) plan, participant contributions are 100% immediately vested, but matching contributions may be subjected to

a vesting schedule (not available under the American Funds custodial agreement).
• 403(b) programs that are subject to ERISA have to file form 5500.
• Similar to a 401(k), matching contributions may be subject to discrimination testing (does not apply to government or church


Retirement Planning Strategies
Saving for retirement may likely be the last thing on your mind, but it shouldn’t be. Retirement savings should be started as early as

possible. Saving now will earn you more from interest over time. Also, saving early will give you more time to recover from any investment

losses. Remember what we learned in the time value of money lesson. Unfortunately very few young people think of retirement planning.
Also, it is difficult to accurately predict how much you will need for retirement and how long you will spend in retirement because there are

so many variables. Many things can alter a retirement plan such as beginning a family, starting a career, or a disabling accident may force

you to change your financial plans. This is all the more reason it is important to start planning and saving early. Building a retirement

plan in your budget will help you stay on course. Just budget like another bill you must pay every month. Remember budgeting allows you take

a close look at your expenses and helps you determine how much you can contribute to your retirement savings. Making it a long term goal will

help in determining how much you need to save each month.
Everyone should be putting something away for retirement, even if it’s only $100 a month. You’re still creating a habit of saving. The

earlier you start saving, the more money you’ll save. The later you start, the more money you’ll have to save later.