Retirement: Other types of IRAs
Education IRA - This IRA is also known as the
Coverdell Education Savings Account and is used exclusively to pay
education expenses. Similar to the Roth IRA, contributions are
nondeductible, earnings accumulate tax-free, and qualified
withdrawals are tax-free. The contribution is limited to
$2,000 per child in 2002 (from $500 for 2001). For more complete
details, see
Education IRAs Build Tax-Free Earnings.
SEP IRA Simplified Employee
Pension (SEP) - This plan was enacted to allow
employers to provide retirement benefits to employees while limiting the
paperwork and fiduciary responsibility usually associated with qualified
retirement plans. Under this plan, the employer makes a contribution to
an IRA set up by the employee and receives a deduction for the
contribution.
Contributions made by the employer cannot exceed 25% of the employee's
income, up to a maximum of $41,000 annually. The employer is required to
contribute equal percentages to each employee's account. In addition,
the employee is permitted to make a regular contribution (up to a
maximum of $3,000 or $3,500 for individual, depending on their age.) to
the account; the deductibility of which is determined according to the
employee's modified adjusted gross income level.
SAR SEP - SAR SEP is an acronym for Salary Reduction SEP. This
plan is for small employers and is only available to companies with 25
or fewer employees. Under this plan, employees may elect to make "salary
deduction" contributions to an IRA account. Contributions are limited to
25% of compensation up to a maximum of $13,000 per year. (recognize any
recurring theme) This plan is similar to the 401k plan with respect to
contributions.
As it becomes more and more apparent
that social security will not be sufficient to provide for the
retirement of the American worker, the U.S. Congress has attempted to
provide the individual and the business community with numerous
additional retirement planning options.
As we move into the future, there will
- undoubtedly - be more options made available to the employer and
employee. The most important point to take away from this discussion, is
that YOU are responsible for your own financial retirement security. You
should explore all options available and ask your employer for
clarification on any issues which are unclear or ambiguous. Remember,
it's your money, and your FUTURE.
Next==>>
A Keogh for the self
employed
Waste your money and you're
only out of money,
but waste your time and you've lost a part of your
life.
-- Michael Leboeuf --
Table of
Contents:
-
What Are Retirement Accounts?
-
Employer Based
Retirement Plans
-
401(k) Plans
-
Individual Retirement Accounts (IRAs)
-
Roth IRA
-
What is a Rollover IRA?
-
Converting and
Recharacterizing of an IRA
-
Education IRA & SEP IRA
-
Self Employed Retirement plan: Keogh
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