Retirement Plan Options

Traditional IRA

A traditional Individual Retirement Arrangement (IRA) is a retirement savings plan. Generally, contributions made to a traditional IRA are tax deductible. Earnings in this retirement plan option are tax deferred until the account owner begins taking distributions after reaching age 59 ½. When distributions are taken after reaching retirement age, the distributions are taxed as income.

When the account owner reaches age 72 an annual required minimum distribution must be taken from the account. For 2022 and 2023, the contribution limit is $6,000 and $6,500 of earned income respectively. For those age 50 or older there is a catch-up allowance of $1,000 for a total contribution limit of $7,000 and $7,500.

Are you interested in setting up a Self Directed account with one of these types of retirement plans? Contact a representative today!

Roth IRA

A Roth IRA has many similarities to the traditional IRA, but there are some important differences with this retirement plan option. Roth IRA contributions are not tax deductible. However, the earnings on the account are tax deferred and the distributions from a Roth IRA account are tax-free.

There are income limitations on those who qualify for a Roth IRA. Distributions can be taken upon reaching age 59 ½ and there is no mandatory distribution age with a Roth IRA account. For 2022 and 2023, the contribution limits are $6,000 and $6,500 of earned income. For those aged 50 or older there is a catch-up allowance of $1,000 for a total contribution limits of $7,000 for 2022 and $7,500 for 2023.

SEP (Simplified Employee Pension IRA)

A SEP is a simple retirement plan option that an employer or a self-employed individual can establish. They are very popular with those who are self-employed because they have generous contribution limits and are easy to use. Generally, the contribution limit is 25% of W-2 income or 20% of self-employed income up to $61,000 maximum contribution for 2022 and $66,000 for 2023. Mandatory distributions are required at age 72 (or age 73, if you reach age 72 after December 31, 2022)

Other retirement plan options that are not offered by STC

SIMPLE (Savings Incentive Match Plan IRA)

A SIMPLE retirement plan option can be established by employers, including self-employed individuals. It is a salary reduction and matching plan that works like a 401(k) retirement plan. Employers are generally required to match each employee’s salary reduction contributions up to 3% of the employee’s compensation. Employee contribution limits for 2022 and 2023 are $14,000 and $15,500 respectively. A catch up allowance increases the limit for those aged 50 or older by $3,000 in 2022 and $3,500 in 2023 for a total contribution limits of $17,000 and $19,000.

Solo 401(k) Retirement Plan

A retirement plan option available to sole proprietors or business owners with very limited employees. A spouse can also work in the business and participate in a Solo 401(k) retirement plan. This type of retirement plan allows for both employer and employee contributions. The employee contribution can be designated as Roth IRA funds meaning they are made post-tax and the earnings will not be taxed when distributions are taken after reaching retirement age.

Employee contribution limit for 2022 is $20,500 with a catch up allowance of $6,500 for a total contribution limit of $27,000. For 2023 the limit if $22,500 with a catch up allowance of $7,500 for a total contribution of $30,000.  Total Solo 401(k) retirement plan contributions are limited to $61,000 for 2022 and $66,000 for 2023, not counting catch up contributions.

401(k) Retirement Plan

A qualified retirement plan option established by an employer to which eligible employees may make contributions on a post-tax and/or pre-tax basis. Employers offering 401(k) retirement plans may make matching or non-elective contributions on behalf of employees and may also add a profit-sharing feature to the plan. With this type of retirement plan, participants who are no longer employed by the company have the option to rollover their 401(k) retirement accounts to a self-directed retirement plan.

TSP (Thrift Savings Plan)

A retirement plan option for federal employees. The TSP is a defined contribution plan designed to give federal employees the same retirement savings related benefits that workers in the private sector have with 401(k) plans. Contributions are automatically deducted from each paycheck. When an individual leaves federal government employment, they can rollover their TSP funds into a self-directed retirement account.

TSA (Tax-Sheltered Annuity) & 403(b) plans

A TSA retirement plan option is a type of annuity that allows employees to make contributions from their income into a retirement plan. The employer can also make direct contributions to the plan. In the U.S., one specific tax-sheltered annuity is the IRS Code Section 403(b) plan. This provides a retirement plan for employees of certain non-profit and public education institutions. When an individual leaves the organization’s employment, they can rollover their TSA funds into a self-directed retirement account.

Have Retirement Planning questions? Call an STC Representative Today at 1-866-682-3683!

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