Pension & Retirement Planning

Traditional IRA’s: Uses before tax dollars, so there is a deduction available for contributions. The account grows tax free until distribution.

Roth IRA’s: Funded with after tax dollars, there is no current year deduction. The growth and distribution are tax-free.

401(k): Employer sponsored retirement plan. Contributions are often taken directly from payroll. Employee contributions are made with pre-tax dollars and are tax deductible. Provisions can and often do allow for Employer Matching contributions up to a specified percentage of income.

Deferred Compensation Plans: Retirement plans that allow an employee to defer part of their compensation until a future date.  The employee does not pay income tax on the deferral until it is received. They can be qualified plans such as a 401K or 403b or nonqualified. A non-qualified plan is  typically used for highly compensated employees and can be set up so it does not need to include all employees.

Defined Benefit Plans: These are like traditional Pension Plans. They are employer sponsored plans that will pay a benefit based on factors such as salary and years with the company. They have a set amount that they will provide at retirement and contributions are made to reach that specified amount.