Retirement Income Planning Tools

is a type of employer-sponsored retirement plan named after a section of the United States Internal Revenue Code. A 401(k) plan allows a worker to save for retirement while deferring income taxes on the saved money or earnings until withdrawal. Comparable types of salary-deferral retirement plans include 403(b) plans covering workers in educational institutions, churches, public hospitals, and non-profit organizations and 457 plans which cover employees of state and local governments and certain tax-exempt entities.

As an employee benefit, a 401(k) must be sponsored by an employer, typically a private sector corporation. A self-employed individual can set up a 401(k) plan and, until 1986, a government entity could do so as well. The employer acts as a plan fiduciary and is responsible for creating and designing the plan, as well as selecting and monitoring plan investments. (In practice, nearly all employers outsource all of this work to one or more financial services companies, such as a bank, mutual fund, third party administrator, or insurance company.)

The 457 plan is a type of tax advantaged defined contribution retirement plan that is available for governmental and certain non governmental employers in the United States. The employer provides the plan and the employee defers compensation into it on a pre-tax basis. For the most part the plan operates similarly to a 401(k) or 403(b) plan most people are familiar with in the US. The key difference is unlike a 401(k) plan, there is no 10% penalty for withdrawal before the age of 59 1/2 (although the withdrawal is subject to regular income taxation).

A certificate of deposit or CD is, in the United States, a time deposit, a familiar financial product, commonly offered to consumers by banks, thrift institutions, and credit unions.

Such CDs are similar to savings accounts in being insured—by the FDIC for banks or by the NCUA for credit unions—and thus virtually risk-free; they are "money in the bank." They are different from savings accounts in that the CD has a specific, fixed term—often three months, six months, or one to five years—and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.

An annuity is an insurance contract. An annuity contract is created when an individual gives the insurance company money which may grow tax deferred and then can be distributed back to the owner in several ways.

There are a number of different types of IRAs which may be either employer provided plans and self-provided plans. The types include:

* Roth IRA - contributions are made with after-tax assets, all transactions within the IRA are tax-free, and withdrawals are usually tax-free. Named for Senator William Roth.
* Traditional IRA - contributions are often tax-deductible (often simplified as "money is deposited before tax" or "contributions are made with pre-tax assets"), all transactions and earnings within the IRA are tax-free, and withdrawals at retirement are taxed as income (except for contributions that were not deducted).
* SEP IRA - a provision that allows an employer (typically a small business or self-employed individual) to make retirement plan contributions into a Traditional IRA established in the employee's name, instead of to a pension fund account in the company's name.
* SIMPLE IRA - a simplified employee pension plan that allows both employer and employee contributions, similar to a 401(k) plan, but with lower contribution limits and simpler (and thus less costly) administration. Although it is termed an IRA, it is treated separately.

There are two other subtypes of IRA, named Rollover IRA and Conduit IRA, that are obsolete under current tax law (their functions have been subsumed by the Traditional IRA) but this tax law is set to expire unless extended.

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Social security primarily refers to a field of social welfare concerned with social protection, or protection against socially recognized conditions, including poverty, old age, disability, unemployment, families with children and others. In fact, Social security refers to a slightly broader concept compared with social protection, but some publications use them interchangeably.

Variable Annuity nnuity contracts are offered by organizations and individuals that may accumulate value and take a current value and pay it out over a period of years. These contracts are regulated by various jurisdictions.