Free Tax Advisor

Tax Tips For Life

Subscribe via Email

 

USA Retirement Plans Glossary of Terms

IRA: This individual retirement account that is funded with before tax money. That means this is a tax-qualified retirement savings account and it is maintained by employee and is not sponsored or contributed to by an employer. That means you can deduct the amount you contribute from your income giving you tax savings in the current tax filing year. However money is taxed when you take it out at the retirement. You may be able to contribute to an IRA account in addition to the amount you save in 401k plan depending on your AGI (adjusted gross income).

ROTH IRA: This individual retirement account is funded with after taxed money so there is no immediate tax savings. However money that grows in this account is tax free, meaning you will never owe any taxes when you take money out of this account at the retirement. If you are in a low income bracket this is a fantastic way to save and grow your retirement.

Defined Contribution Plan: A type of retirement plan that specifies the contributions made to the plan, either as a flat dollar amount or as a percent of compensation.

Qualified Retirement Plan: An employee funded retirement plan that you may contribute to on a pre-tax basis which provides tax-deferred earnings. Tax deferred means you do not pay taxes on the earnings until you withdraw money from this account and money grows tax free.

Tax Deferred Investment: Investment where earning grows tax free. Meaning that taxes are deferred or delayed normally until you receive a distribution. Contributions to 401(k) plan or traditional IRA plan are examples of tax-deferred investments

Vesting: Company sponsored retirement plan normally has two portions, your contribution and company contribution. Your contribution is yours and it is100% vested (part of your retirement fund) upon contribution. Company contribution generally has vesting period, means even it shows up in your retirement account it is not yours until certain conditions are met. Generally these conditions are tide to length of time of your employment with current employer.

Rollover: A retirement plan fund moved from one trustee (Account) to another because of changes in employment status.

FREE TAX FILING - Click Here

If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.

Note: Articles on Free Tax Advisor web site is strictly information purpose only. FreeTaxAdvisor.com or the author is not engaged in providing legal advice. Providing you with general tax information which helps our friends and general public is the goal. For a specific and pertaining issue applicable to you, consider consulting a qualified financial advisor /CPA, your HR department or your lawyer.

Powered by Wordpress | WP Bliss theme by WP Remix
Copyright 2007. Free Tax Advisor. All rights reserved

• Home
• About Us
• FREE PC-SCAN
• FREE TAX-Filing
• TAX-FORMS