New York - Retirement plans are constantly changing and beginning modified. The following represents a brief list of the most popular retirement plans.
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Defined benefit plans - Traditionally called - pensions, these plans which are no longer offered by most companies. These plans are characterized by the fact that employers contribute money and make a binding promise that retired workers will receive income for the rest of the lives based upon a defined formula. No employee contributions were allowed and employers made investment decisions.
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Defined contributions plans - Commonly referred to as 401(K) accounts,403(B) or TSA plans, profit sharing or ESOPs, these plans are now commonly used as employers don't have a binding obligation to pay any benefits. Employers and or employees make contributions into these plans and employees generally monitor their own investments. Many plans are optional and many have employer "matching" payments.
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Non-qualified retirement plans - The word "qualified" generally refers to the tax-deferral advantage offered in most retirement plans (taxes are deferred until you take the money out). Most plans such as 401(K) plans and other defined contribution plans are qualified. Non-qualified plans are generally used to provide additional retirement benefits to senior management or key employees. Unlike 401(K) plans, contributions are taxed immediately. Any earnings associated with the contributions are tax-deferred so long as the money remains in the plan.
Regardless of what plans your company offers - make sure you are participating in all the ones you are eligible for.
Your independent Fee-Only financial adviser can help you determine how your retirement plans will benefit your retirement planning.
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