What Is a “Stretch” IRA? Finding a method to leave a lasting legacy to your loved ones without increasing their tax burdens can be difficult and complicated. A “stretch” IRA may be a useful approach that can benefit your heirs for generations to come. A stretch IRA is not a special type of IRA but
What Is an IRA Rollover? If you leave a job or retire, you might want to transfer the money you’ve invested in one or more employer-sponsored retirement plans to an individual retirement account (IRA). An IRA rollover is an effective way to keep your money accumulating tax deferred. Using an IRA rollover, you transfer your
What Is a Roth 401(k)? The arena of employer-sponsored retirement plans has been dominated by 401(k) plans that are funded with pre-tax contributions, which effectively defers taxes until distributions begin. However, the recently created Roth 401(k) is funded with after-tax money just like a Roth IRA, allowing retirees to enjoy qualified tax-free distributions once they
Profit-Sharing Plans David Wray, the president of the Plan Sponsor Council of America, once said that the purpose of profit-sharing plans is “to generate goodwill and a feeling of partnership” between employer and employee. Profit-sharing plans give employees a share in the profits of a company each year and can help fund their retirements. All
Money Purchase Pension Plans A money purchase plan is a type of defined-contribution plan that is similar to a profit-sharing plan, except that the contribution amounts are fixed rather than variable. Thus, employers are required to make annual contributions to each employee’s account regardless of the company’s profitability for the year. These plans can be
What Is a 403(b) Plan? A 403(b) plan is a special tax-deferred retirement savings plan that is often referred to as a tax-sheltered annuity, a tax-deferred annuity, or a 403(b) annuity. It is similar to a 401(k), but only the employees of public school systems and 501(c)(3) organizations are eligible to participate in 403(b) plans.
Why Do People Buy Annuities? Annuities are insurance-based financial vehicles that can provide many benefits sought by retirement-minded investors. There are a number of reasons why people buy annuities. Deferral of taxes is a big benefit, and so is the ability to put large sums of money into an annuity — more than is allowed
Split-Annuity Strategy A split-annuity strategy involves purchasing two types of annuity contracts: immediate and deferred. The immediate annuity would provide a current income stream during the early years of retirement, and the deferred annuity would have the potential to provide a future income stream. An immediate fixed annuity earns a guaranteed rate of return and
Annuity Living Benefits Many variable annuity contracts offer “living benefit” guarantees. For an additional cost, the contract holder may be able to purchase guarantees regardless of the account value. Adding a guaranteed minimum withdrawal benefit to a variable annuity contract could allow the contract owner to withdraw a fixed percentage (usually 5% to 7%) of
How Much Do I Need to Save? Many Americans realize the importance of saving for retirement, but knowing exactly how much they need to save is another issue altogether. With all the information available about retirement, it is sometimes difficult to decipher what is appropriate for your specific situation. One rule of thumb is that
