1. Tax Deferred Investing
Planning for Retirement with:
Tax Deferred Investing

2. Types of Retirement Plans
Employer-sponsored plans
Employer-paid pensions
Self-employed IRAs
Traditional IRAs (available to most)
Roth IRA (available to most)
Plans differ in:
Who is eligible to participate in the plan
The amount (limit) you can contribute yearly to a plan
The types of investments available in the plan
The tax consequences for early withdrawal

3. Employer Sponsored Plans
Definition: A type of benefit plan that an employer offers for their employees at no or a relatively low cost to the employees.
Employees’ money is deposited into these accounts (typically a % of total earnings)
Known as a “salary-reduction”
Employees are voluntarily enrolled in this type of plan by their employer.

4. Types of Employer Sponsored Plans
401k
Traditional
Roth
403B
457 Plan

5. 401K
Traditional 401k- plan established by employers to which employees may make salary deferral (salary reduction) contributions on a pretax basis
Funded with pretax money, which increases the amount invested in the account; however, all withdrawals are taxed
Based on Gross income
Some employers contribute a match or a percentage of your contribution
Maximum contribution is $18,000 -under age 50 and up to $24,000- age 50+ (2016)

6. Roth 401k
Roth 401K– workers contribute AFTER TAX through their employer
After the investor reaches age 59 ½ , withdrawals of any money from the account (including investment gains) are tax-free
No income limitations
Well-suited to people who think they will be in a higher tax bracket in retirement than they are now
Same contribution limits as traditional 401k

7. Employer Sponsored Plans
403B Retirement Plan- Retirement Plan offered by public schools and non-profits
Fewer employers in this type match contributions
Contribution rules same as 401K
Section 457 Retirement Plan- Retirement Plan offered by State & Local Government agencies
Employer matching virtually non-existent
Contribution rules same as above

8. Employer- Paid Plans (Pensions)
A type of retirement plan where an employer makes contributions toward a pool of funds set aside for an employee's future benefit
Pool of funds is invested on the employee's behalf, allowing the employee to receive benefits upon retirement
Two types of pension plans:
Defined-benefit
Defined Contribution

9. Defined Benefit Pension Plans
Defined Benefit Plan- guarantees that the employee will receive a definite amount of benefit upon retirement, regardless of the performance of the underlying investment pool
Amount received is determined by:
Salary history
Duration of employment
Company earnings may need to be utilized in the event that the returns from the investments devoted to funding employee’s retirement come up short

10. Defined Contribution Plans
Defined-contribution plan- plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee.
Final amount of benefit received by the employee depends on the investment's performance
No guarantee on amount the employee will receive

11. Self-Employed Retirement Plans
Types of plans available for those that own their own business.
Three types to choose from:
SEP Plan
SIMPLE IRA
Solo 401k

12. Self-Employed Retirement Plans
Simplified Employee Pension (SEP)
A SEP plan is similar to an IRA but with higher maximum contributions.
Allowed to skip yearly contributions
Max contribution is $53,000 for 2016
Savings Incentive Match Plan for Employees (SIMPLE IRA)
Same investment, rollover and distribution rules as a traditional IRA except for the contribution limits
Must have less than 100 employees to qualify
Max contribution of $12,500 (2016) <50 or 15,500 for 50+

13. Self-Employed Retirement Plans
SOLO 401K - Sole proprietors with no employees other than a spouse can contribute to this type of plan
Max contributions: up to $18,000 for those <50 or $24,000 for those 50+

14. Individual Retirement Accounts (IRAs)
“Stand alone” accounts- not affiliated with other types of retirement accounts
Type of personal retirement savings plan
Two types of IRAs:
Traditional IRA
Roth IRA

15. Traditional IRAs
Can be funded through April 15th of each year for the prior year with the maximum contribution allowed by law
Maximum contribution per year for 2016
Under age 50 is $5,500;
50+ = $6,500 per year
Contributions can be made up to age 70;
You can’t make regular contributions to a traditional IRA in the year you reach 70½
At age 70 ½ you are required to start withdrawing from the account

16. Withdrawal Rules for Traditional IRAs
With Traditional IRAs, you defer taxes until you begin to withdraw money. The rules vary depending on your age.
Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits, etc.)
You should also consider creating a plan for taking distributions
Available to everyone; no income restrictions

17. Traditional IRAs Continued
Withdrawals prior to age 59½
Distributions from Traditional IRAs prior to age 59½ are subject to a 10% penalty, plus applicable federal and state taxes.
You may be able to avoid the penalty on early withdrawals from your IRA if you need the money for:
First-time home purchase
Qualified education expenses
Death or disability
Unreimbursed medical expenses
Health insurance, if you’re unemployed

18. ROTH IRA Contributions
Similar to traditional IRA (some restrictions apply)
Contributions are taxed via your paycheck; money is deposited into the account after tax is collected
This makes withdrawals tax free! Including all interest earned & principle withdrawn at or after age 59 ½
2016: ($132K GI for single; $194K GI married limit to participate)

19. Roth IRA Contributions
You can contribute to the Roth as long as you are a worker or a spouse of a worker
There is no mandatory distribution age like the Traditional IRA

20. Withdrawal rules for Roth IRAs
Withdrawal from a Roth IRA is tax-free and penalty-free, as long as the five-year aging requirement has been met and one of the following conditions is met:
Over age 59½
Death or disability
Qualified first-time home purchase
A non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies.

21. How do you know what is right for you?
Things to consider:
The investment choices available
Some companies limit investment choices to mutual funds, bonds and money-market instruments
The fees that apply
Important to research the fees that apply to all types of accounts to compare
Accessibility
Are you able to access your money (as a loan or cash) when you want or need it? Are there restrictions/fees involved?
Professional Investment Management Cost and Availability
Do you have the time properly manage your plan investments
Will you need to hire a professional investment advisor?