CHAPTER 23
The 401(k), the SEP, and the Keogh Plan 쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆
“In two days, tomorrow will be yesterday.”
Do I Need to Read This Chapter? ●
Am I clear on the different retirement savings options that may be available to me?
●
If my employer offers a 401(k), am I making the most of it?
●
If I’m self-employed, have I investigated the benefits of SEPs and Keoghs?
n increasingly popular way of saving for retirement is the 401(k) plan, named after the tax law provision that makes it possible. The 401(k) is known as the deferred salary reduction plan and allows an employee to set aside part of his or her salary into a tax-sheltered account that grows tax free until after retirement. Don’t confuse the 401(k) with a 403(b). A 403(b) is a retirement plan designed for employees of nonprofit organizations (schools, hospitals, etc.), whereas the 401(k) is for employees of private, for-profit businesses. Salary deductions for a 403(b) are treated in the same manner as the funds in the 401(k) account, which is excluded from taxable income, while the interest earned compounds tax deferred until you withdraw the funds.
A
Many employers offering 401(k) plans will match contributions. An employer may add an amount for each dollar you contribute, up to a certain percentage of your salary or add a fixed sum. It is an automatic return on your investment
197 Copyright © 2008, 1998, 1994, 1991, 1988, 1986 by Joel Lerner. Click here for terms of use.
