IRA and Company Sponsored Investments

What is the difference between a 401K and a 403B?

403B is considered government-owned and nonprofit

What is the major benefit of a 401K/403B?

You get to invest the money how you choose to (stocks, bonds, mutual funds, ex)

What age can you access your 401K/403B without any penalties?

59 ½ (401K/403B)

When do you pay the tax on the 401K/403B money?

When you withdraw money from the account

What does IRA stand for?

Individual retirement account

How much can you contribute to a Traditional or Roth IRA each year?

$6,000

What is the primary benefit of the Roth IRA?

Your contributions can be withdrawn at any time without penalty or tax., gains are tax free if all requirements are met, and do not have to withdraw money starting at age 72

What is the primary benefit of the Traditional IRA?

Reduces your current income tax and tax-deferred benefits

At what age can you access this IRA money without any potential consequences?

59 ½ (IRA)

When do you pay the taxes on the Traditional IRA?

Withdrawing money

What is the purpose of a 529 Plan?

It is a plan designed for post-secondary education, can be used for qualified expenses such as room and board, books, and tuition.

What are the various company-sponsored investments?

Pension, annuities, profit sharing/ESOP, and 401K/403B

What is a pension?

An employee is paid a guaranteed fixed monthly amount at retirement

How does a pension work?

Employer contributes money and employee contributes - years of service and salary are major factors in determining how much per month go into retirement

What are annuities?

Receive a fixed amount each month at a future date

How do annuities work?

The amount depends on the length of the annuity, typically bought through an insurance company for life insurance, the employee chooses how to invest the money (stocks, mutual funds, bonds or cash equivalents), can have high fees or low returns (downside)

What is profit sharing/ESOP?

Paid based upon company achieving financial goals

How do profit sharing/ESOPs work?

They often limit how much and how often you can take money out, could get cash or company stocks when you take money out

What are 401K/403B’s?

They are pretty much the same things - provided by employer and they can match your contribution

How do 401K/403B’s work?

There are contribution limits per year, your choice in what to invest in (stocks, bonds, mutual funds, ex), get tax deductions which lowers your income tax, can not access until 59 ½ without a 10% penalty, must pay tax withdrawals, vested

What does vested mean?

Length of service working in order to receive and keep the company match