Other Types Of IRAs
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Traditional and Roth IRAs are the best-known IRA options, but there are other types of IRAs.
- A Simplified Employee Pension IRA (SEP IRA) is a retirement plan
established by employers, including
self-employed individuals.
- With a SEP, employers
make tax-deductible contributions of up to 15
percent of compensation on behalf of eligible
employees.
- Participating employees
must establish a traditional IRA to which the
employer deposits SEP contributions.
- Employees do not pay federal income taxes on SEP contributions, but the contributions
are taxed upon distribution.
- Simple IRAs were designed to make it easier for businesses with less than 100
employees to offer workers a tax-advantaged, company-sponsored retirement plan.
- SIMPLE plans can be
funded by employer contributions and
contributions from an employee's pre-tax income.
- Contributions and investment earnings grow tax deferred until withdrawal, when they
are taxed as ordinary income.
- An Individual(k) is a
defined contribution plan for businesses that
employ only the owners, their spouses and
partners.
- Individual(k) plans have
very high contribution limits and allow
participants to save for retirement quickly
through salary deferrals and profit-sharing.
- The 2009/2010 contribution limits for
individuals under the age of 50 is $49,000 and
for individuals age 50 or older is $54,500.
- Contributions are deductible for federal income tax purposes and earnings grow tax deferred.
The USAA Educational Foundation Publications, Planning For
Retirement and Retirement Planning In Your
20s And 30s, offer more information.
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Updated Thursday, January 28, 2010
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| © The USAA Educational Foundation, 2000 -
All rights reserved.
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Basic Money Management
Basic Money Management
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