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Learn More About: IRAs and 401(k)s

Individual Retirement Accounts (IRAs) and 401(k)s are two popular types of retirement-savings accounts. People may open and fund the accounts with savings during their working years and withdraw money from the accounts in retirement to pay for living expenses.

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IRAs vs. 401(k)s: Explained

Individual Retirement Accounts (IRAs) and 401(k)s are two popular types of retirement-savings accounts. People may open and fund the accounts with savings during their working years and withdraw money from the accounts in retirement to pay for living expenses.

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Payroll Deduction IRAs: Retirement Options for All Employers

One of the simplest retirement plan options – Payroll Deduction IRAs – give employers the ability to offer their employees an easy to understand, cost effective way to save for retirement …

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Traditional IRAs: Tax Benefits

A Traditional IRA is a retirement savings account that allows individuals to deposit pre-tax income into investments – such as mutual funds, stocks, bonds, or ETFs – and these deposits can grow tax-deferred …

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Roth IRA: Invest for a Tax Break

A Roth IRA is a retirement account created to encourage individuals to save by offering a tax benefit. The account holds investments selected by the individual– such as mutual funds, stocks, bonds and ETFs, selected by the account owner …

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401(k)s: Employer-Sponsored Plans

A 401(k) is a retirement savings plan offered by employers to their employees. The plan – also known as a qualified savings plan – gives employees the ability to contribute some of their earnings to a tax advantaged savings account …

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SEP-IRAs: Retirement Saving for Self-Employed Individuals

You’ve heard about Individual Retirement Arrangements (IRAs) as a good way to save when you don’t have access to a 401(k)-type plan. But if you’re self-employed, there’s an even better option — a simplified employee pension, or SEP-IRA. A SEP-IRA has much higher contribution limits than regular IRAs. Plus, they are easy to set up. Any size business can open a SEP-IRA. Only the employer can make contributions on behalf of employees. So, if you’re self-employed and you’re the only employee of your business, you’ll make contributions to the plan on your own behalf… You’ve heard about Individual Retirement Arrangements (IRAs) as a good way to save when you don’t have access to a 401(k)-type plan. But if you’re self-employed, there’s an even better option — a simplified employee pension, or SEP-IRA. A SEP-IRA has much higher contribution limits than regular IRAs. Plus, they are easy to set up. Any size business can open a SEP-IRA. Only the employer can make contributions on behalf of employees. So, if you’re self-employed and you’re the only employee of your business, you’ll make contributions to the plan on your own behalf. Here’s what you need to know about SEP-IRAs. SEP-IRA Basics Here are the basics of SEP-IRAs for the selfemployed: » You can open one with your bank or other financial institution. The person you work with will help you fill out a form for an IRS-approved “prototype SEP plan” or will help you complete IRS Form 5305- SEP. You don’t have to file the form with the IRS. It simply documents that you established the plan. » SEP-IRAs follow Traditional IRA rules on how they are taxed. Your contributions are tax-deferred until you withdraw them in retirement. » You can contribute up to 25 percent of your net earnings or $53,000 for tax year 2015, whichever is less. » You can choose among investment options. Typically, banks offer certificates of deposit (CDs) or money market funds. Other institutions, such as brokerages, life insurance companies and credit unions, offer stocks, bonds, mutual funds and other options. » You can roll your SEP-IRA into another SEP-IRA or Traditional IRA. If you take a job that includes a 401(k)-type plan, you can roll your SEP-IRA into the plan, as long as it accepts rollovers. » If you hold on to your business and take a second job that offers a 401(k)-type plan, you can participate in both. » You can’t take a loan from your SEPIRA. If you need access to the money before you reach age 59½, you can take a withdrawal, but you’ll typically pay ordinary income tax and a 10 percent penalty. » You can avoid the 10 percent penalty on your early withdrawal if it’s for certain reasons. These include: » College expenses » First-time home purchase (up to $10,000) »Certain medical expenses » Total and permanent disability » If you’re a reservist called to active duty » You inherit an IRA » You are receiving distribution in the form of an annuity » You’ll need to start taking distributions when you reach age 70½. The financial institution that holds your account will notify you when you need to start making withdrawals. Take Action! Q Make a plan for your retirement. Be specific and set realistic goals to help make retirement attainable. Q If you’re self-employed, consider a SEPIRA for your retirement savings, rather than a Traditional or Roth IRA. You’ll benefit from higher contribution limits. Q You can open one through a bank or other financial institution. Q Understand the investment options available and decide if they are right for you before opening your account. Q Since SEP-IRAs follow the rules for Traditional IRAs, see our related article on IRAs. Q Learn more about SEP-IRAs by reading “SEP Plan FAQs” on the IRS website.

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Saving for Retirement Through IRAs

Millions of working Americans have access
to work-based retirement savings plans,
such as a 401(k). But more than 70 million workers do not, in which case, an Individual Retirement Arrangement, or IRA, is a great way to save for retirement.Here’s what you need to know about IRAs…

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