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  Monday November 20, 2017

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PENSIONS, 401(K)S, 403(B)S, AND KEOGHS
Learn even more about this topic with the Encyclopedia of Personal Finance

These terms refer to both specific plans and types of plans.

401(k) plan: An employer-sponsored retirement plan that is usually funded by personal, non-taxable contributions from an employee's earnings as well as by contributions from the employer. There are limits to how much the employer and employees can contribute.

403(b) plan: A retirement plan for employees in nonprofit organizations. It invests employee contributions and lets them grow tax-deferred until withdrawal.

Defined benefit plan: A type of pension plan in which the amount paid to the pension holder is determined by a formula.

Keogh plan (HR-10): A retirement plan for self-employed individuals or non-incorporated businesses.

Pension funds: Funds set aside by employers to provide for their workers' retirements. The establishment and maintenance of pension funds are regulated.

Qualified pension plan: A pension plan that meets Internal Revenue Code requirements for tax advantages, such as deferral of income taxation on contributions made from earned income, and tax deferral of investment earnings.

SARSEP: Salary reduction simplified employee pension. An employee pension, some of the contributions of which are deducted from the employee's paycheck. The employer also makes contributions. This was replaced by the SIMPLE-IRA for plans established after 1996.

SIMPLE: Savings incentive match plan for employees. A simplified employee pension plan that has low operating costs and reporting requirements. It can be set up as a SIMPLE 401(k) or SIMPLE-IRA plan. The SIMPLE-IRA replaces the SARSEP for plans established after 1996.

Annuities are our next subject.




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