IRAs, ROTH IRAs, 401(k)/403(b) Rollovers and Retirement Savings Vehicles

One of the most important assets you may ever have and easily one of the very best tools for saving for retirement is tax-deferred account like an IRA or company-sponsored 401(k) plan. We can help you manage both.

At Lions Bridge Financial, we never – ever – talk down to our clients, but we also never want to assume they know something they may not know, so let’s start with a definition:
A 401(k) is a retirement plan that allows employees to contribute a certain percentage of their wages into a tax-deferred account to save and invest. Some companies match some of this money.
The most common 401(k) plans are called traditional 401(k)s and if you work for a non-profit, a 403(b) plan. A type that gives employers more options is the Safe Harbor 401(k) plan.

The Safe Harbor 401(k) offers the same benefits as the traditional 401(k), but it gives employers more options when they match their employees’ contributions: Companies can make contributions for each eligible employee (even if the employee does not contribute) of 3% of annual compensation, or the company can match 100 percent of the first 3 percent of employees’ deferred contributions, plus 50 percent of the next 2 percent of employees’ contributions. While the mandatory employee match is larger with a Safe Harbor 401(k), may permit employers to make more pre-tax contributions on their own behalf.

IRAs
A lot of people think IRA stands for Individual Retirement Account, and they’re right but only partly right.

An IRA, or Individual Retirement Account , is a blanket term for a retirement plan that provides tax advantages for retirement savings.

An IRA can be an Individual Retirement Account or an Individual Retirement Annuity.
An Individual Retirement Account permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later). The exact amount of the withdrawal depends on the year and your age.
Here are some other definitions of Individual Retirement Accounts that we hope you find helpful:

Traditional IRA. With this type of IRA, contributions often are tax-deductible, but withdrawals at retirement often are taxed as income.
Roth IRA. Introduced in 1997, this IRA is named for U.S. Sen. William V. Roth Jr. of Delaware. Unlike the Traditional IRA, contributions are not tax deductible, but earnings and distributions are tax free as long as you have held the account for at least five years and are at least 59½ years old.
SIMPLE IRA. The Savings Incentive Match Plan for Employees (SIMPLE) IRA is for businesses with 100 or fewer employees. The employer must make matching contributions on behalf of eligible participants. Because employers must contribute a set amount each year, this plan is best suited to businesses with consistent earnings. Employees may defer as much as $11,500 in 2011 to a SIMPLE plan, and those who are age 50 or older may contribute an additional $2,500.
SEP IRA. The Simplified Employee Pension (SEP) is funded solely by the employer. Employees are fully vested in the plan from the time they join. Business owners can vary contributions to a SEP from year to year or make none at all. This makes the SEP a good choice for businesses in a less stable financial position. Contributions can be set at a maximum of 25 percent of an employee’s compensation or as much as $49,000 in 2011.
Self-Directed IRA. This permits the account holder to make investments on behalf of the retirement plan.

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