Other retirement plans include defined contribution 401(k)s, SEP, and defined benefit
One common type of company-sponsored employee retirement plans is called a 401(k) plan. While there are legal limits on how much you can contribute, you don’t have to pay income taxes on the money you contribute until you take a withdrawal. The withdrawal may also be subject to a federal 10% penalty if it is taken prior to age 59 ½.
If your company offers a 401(k) plan, study the specifics and talk with a retirement plan specialist. Strongly consider contributing as much as you can as soon as you can. Companies generally offer different options for you to invest the money in your 401(k). Some even offer to match your contributions. If yours does, try to take full advantage of it. Contribute enough to get the full match if you can. Also, take advantage of the new “catch up” provision starting at age 50 to maximize the amount of money you contribute. After all, you’re investing in your own future!
A Simplified Employee Pension Individual Retirement Plan (SEP) is designed for people who are self-employed. Funds may be invested the same way as an IRA.
A defined benefit plan provides a specific income for retired employees, either as a lump sum or as a pension (an annual lifetime payment). The pension amount usually depends on the employee’s age at retirement, final salary, and the number of years on the job.
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