Retirement Planning Terms
Click on a Retirement term to see the answer:
A retirement investing tool with potential tax benefits. Traditional IRA contribution earnings grow tax-deferred, meaning you don’t pay taxes on them until you withdraw them. Contributions to a Traditional IRA may also be tax deductible. An IRA owner must begin taking required minimum distributions (RMD) from their accounts the year they turn 70½. Additionally, they must stop making contributions at that time. Early withdrawal penalties may apply.
An individual retirement plan that is similar to a Traditional IRA. The main differences are that contributions are never deductible, required minimum distributions (RMDs) are not required, and you may continue to contribute as long as you are working (regardless of your age). Qualified distributions are tax-free. Early withdrawal penalties may apply.
SEP (Simplified Employee Pension) IRA.
A tax-deferred retirement plan available to sole proprietors and small businesses. Contributions, up to 25% of each employee’s total compensation, are made by the employer (maximum annual contribution dollar limits apply). These plans follow most of the same rules as Traditional IRAs. Two of the biggest differences are the higher contribution limits, and being able to contribute past age 70½ if still working. Early withdrawal penalties may apply.
*These are basic definitions of IRA accounts and do not cover all possible tax consequences or IRS rules and regulations. Please consult IRS Publication 590 for a complete listing of all IRS rules and regulations regarding IRA accounts. Please consult your tax advisor about possible tax benefits and consequences for opening and contributing to or withdrawing from an IRA.
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