KNOWLEDGE|
(1) |
Individual Retirement Account (IRA) |
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(2) |
Simplified Employee Pension Plan (SEP) |
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(3) |
Self-directed investments |
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(4) |
Profit sharing plans |
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(5) |
401(k) |
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(6) |
Defined benefit plans |
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(1) |
What is Individual Retirement Account (IRA)? An individual retirement account (IRA) is a savings and tax-advantaged investment account that helps individuals save for retirement. There are two types of IRA: traditional IRA and Roth IRA. Individuals can choose the type of retirement account and are required to contribute pre-tax or after-tax salary to that account. For TIPS on how to open, contribute to, and save taxes on each type of IRA, see U.S. IRA Tax Saving Tips. |
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(2) |
What is Simplified Employee Pension Plan (SEP)? SEPs are pension plans that are 100% funded by the employer. SEP plans can provide a significant source of income at retirement by allowing employers to set aside money in retirement accounts for themselves and their employees. Contributions can vary from year to year and are discretionary. |
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(3) |
The premise that SEP is covered (a) Reached age 21 or over. (b) Earned at least $600 during 2020 ($650 for 2021) (c) Performed any services for the employer during any three of the preceding five years |
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(4) |
What is 401(k)? A 401K is a compliant profit-sharing plan into which employees can contribute a portion of their pre-tax pay; As part of the employee benefit, the employer can also match the employee to put the same amount into the account, and the employer can use this amount as a company expense to reduce the company's taxable income for the year. Because employees pay no income tax on the money they put into a retirement account, any money they take out of the account when they reach retirement age is added to their taxable income for individual income tax purposes. |
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(1) |
How to earn retirement credits? Anyone born in 1929 or later needs 10 years of work (40 credits) to be eligible for retirement benefits. The salary for each point is adjusted year by year, subject to inflation. In 2023, for example, individual can receive 1 credit for each $1,640 of earnings. To earn four credits, an individual needs to earn at least $6,560 per year. |
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(2) |
Basic benefits: (a) Lifetime medical for self and spouse. (b) Dependent benefits for disabled, minor or dependent kids even after death of parent. (c) Dependent benefits paid to spouse to care for certain dependents living at home. (d) Small death benefit |
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Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage. |
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