Selecting the Most Appropriate Plan

Withdrawals prior to age 59 1/2 may be subject to penalties and taxes on some plans.

IRA
Every wage earner that wishes to save for retirement with dollars that can grow tax-deferred. Ideal plan for individuals interested in planning ahead for a secure future.
Contributions can grow tax-deferred.
Many contributions may still be deductible.
Personal control of investment media and retirement date.
Non-deductible contributions require long term recor keeping.


ROTH IRA
A wage earner with family income within the Roth IRA AGI limit: Up to $189,000-$199,000 joint, $120,000-$135,000 single filers.
Contributions can grow tax-deferred forever.
Owner can determine and change the investments.
Income (after the later of 5 years or 59 1/2) may be taken tax-free.
Income withdrawal can be postponed forever.


TSA
School teachers, employees of universities, colleges, hospitals, churches and other non-profit organizations wishing to reduce their personal taxes and save for retirement with tax-deferred dollars.
Available only to select group of individuals.
Can usually contribute more than an IRA allows.
Loan provisions are still available.


SIMPLE IRA
Firm with fewer than 100 employees seeking to minimize filings, limit company contributions and paperwork. One short form sets it up and investments are made to an IRA. May exclude employees with less than 3 of previous 5 years of service and those under 21.
Easy to establish.
No government filings.
October 1st deadline for plan set up.
Full flexibility of contributions.
No percentage income contribution limitation.
No contribution required for employees who choose not to participate.
No top-heavy requirements.
Limited employer contributions.
100% usually vested immediately


SEP
Small firm seeking to minimize filings and paperwork. One short form sets it up and investments are made to an IRA. May exclude employees with less than 3 of previous 5 years of service and those under 21.
Easy to establish.
No government filings.
Extended deadline for plan set up.
Full flexibility of contributions.
100% usually vested immediately.


SARSEP
Business with 25 or fewer employees wanting to offer employees a way to invest through convenient salary reduction in before-tax dollars. Limit contribution by the business. Special non-discrimination test. May exclude employees with less than 3 of previous 5 years of service and those under 21.
Simple, inexpensive “401(k)”.
IRA replacement.
Promote employee participation.
100% usually vested immediately.
Special non-discrimination test.
New SARSEP’s cannot be established.


Profit Sharing
A firm where cash flow and income are somewhat variable. Ideal plan for firm wanting a flexible contribution with a maximum of 25%. May exclude employees under age 21 and those with less than 2 years of service.
Full flexibility of contributions.
Part-time employees may be excluded.
Vesting schedule may be used.
Full reporting.
Integration available.
Employee contribution is permitted.


Money Purchase
A firm with substantial income. Ideal for a firm wanting to maximize contributions at a fixed percentage. May exclude employees under age 21 and those with less than 2 years of service.
Maximizes deductible contributions.
Part-time employees may be excluded.
Vesting schedule may be used.
Full reporting.
Integration available.


401(k) Plan
Larger firm where the majority of employees defer a portion of their salary. Ideal for business desiring to contribute on a match basis. Special non-discrimination tests for deferrals. May exclude employees under 21 and those with less than 1 year of service.
Consulting and plan design.
Comprehensive record keeping.
Competitive fees.
Employee communications package.
Vesting schedule may be used for the employer contribution.


Sec. 457 Plan
Installed and administered by the government agency that can limit choices.
Administration of payroll adjustments. Individual enrollment and investments by the employee.