4 Types of Retirement Plans and Employer-Sponsored Plans
Among the different types of retirement plans, there are four main types: government-sponsored plans, personal plans, annuities, and employer-sponsored plans.

Employer-Sponsored Plans

In the rest of this article, we will explore employer-sponsored plans in detail.

Qualified Plans

There are several types of qualified plans:

Non-Qualified Retirement Plans

These are plans that do not meet the IRC or ERISA requirements. These plans are funded by employers and are more flexible but they do not have the tax benefits qualified plans do. Benefits are paid at the retirement age in the form of annuities, which are taxed as ordinary income tax, or in lump sum payments, which can be transferred into an IRA to defer taxes. An example is the 457 plan.

457 plans are aimed at state and local government employees of tax-exempt organizations. In 2013, participants can defer up to $17,500 of their annual income, and contributions and earnings are tax-deferred until withdrawal. Distributions start at retirement age but participants can also take distributions if they change jobs or if they have an emergency, including death. Participants can choose to take distributions as a lump sum, annual installments or as an annuity. Distributions are subject to ordinary income taxes and the amounts cannot be transferred into an IRA.
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Copyrighted 2015. Content published with author's permission.

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