Retirement Plans  Sarah Obaidee Zara Grigorian
Types Brief Description  Pros  Cons  Traditional IRA Tax deferred account specifically designed for individuals retirement...
Traditional IRA  <ul><li>What is it?  </li></ul><ul><ul><li>Individual retirement savings,  </li></ul></ul><ul><ul><li>whi...
Traditional IRA  <ul><li>Deductions  </li></ul><ul><ul><li>Eligible for full deduction if AGI is less than $56,000 </li></...
Roth IRA  <ul><li>What is it? </li></ul><ul><ul><li>Individual retirement plan in which contributions are made with post t...
Difference Between Traditional & Roth  <ul><li>How the U.S government treats the tax  </li></ul><ul><li>Ex: Traditional  <...
What is a 401(K)?  <ul><li>An employee can choose to have their employer to take a portion of the they employees wage to p...
Types of 401(k) Plans: <ul><li>Traditional 401(k) plans . </li></ul><ul><li>Safe harbor 401(k) plans </li></ul><ul><li>SIM...
Who Can’t Participate?  <ul><li>Have not attained age 21 </li></ul><ul><li>Have not completed a year of service </li></ul>...
Profit Sharing Plans  <ul><li>A plan that gives employees a share in the profits of the company. Each employee receives a ...
Pros/Cons for Profit Sharing  <ul><li>Pro-A great way to give employees a sense of ownership in the company </li></ul><ul>...
Defined Benefit Plans  <ul><li>What is it?  </li></ul><ul><ul><li>An employer-sponsored retirement plan where employee ben...
ESOP <ul><li>What is it?  </li></ul><ul><ul><li>Is an employee benefit plan which makes the employees of a company owners ...
403(b) Plans  <ul><li>“ A 403(b) plan is a retirement plan for certain public school employees, employees of tax exempt or...
457 Plan  <ul><li>What is it?  </li></ul><ul><ul><li>is a retirement or pension plan that provides benefits to government ...
Bibliography  <ul><li>http://www.investopedia.com/terms/p/profitsharingplan.asp#ixzz1XDgLv7OM </li></ul><ul><li>http://www...
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Concepts of taxation

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Concepts of taxation

  1. 1. Retirement Plans Sarah Obaidee Zara Grigorian
  2. 2. Types Brief Description Pros Cons Traditional IRA Tax deferred account specifically designed for individuals retirement savings Contributions are tax deductible Distributions are taxable: distributions before 59 ½ are subject to 10% Roth IRA <ul><ul><li>Individual retirement plan in which contributions are made with post tax dollars </li></ul></ul>Distributions are non- taxable Heavy penalty for early withdrawal (before 5 yrs). Contributions are non deductible 401 (K) tax deferred Market driven Contributions to saving are tax deductible Contributions are not insured Profit Sharing employees can claim their contributions Employees benefit from the profitability of the company Difficult restrictions when wanting to take out money Defined Benefit Company is in charge of making contributions Employees get to select size of benefits Not be able to choose the individual investments that you put your money into. ESOP’s <ul><ul><li>benefit plan which makes the employees of a company owners of stock in that company </li></ul></ul>Employees benefit from the profitability of the company Money placed in these accounts grows on a federally tax-free basis until withdrawn 403(b) Plans A retirement plan offered by non profit organizations Tax deductible Low interest 457 Plans Retirement plan for government employees Money grows on a federally tax-free basis until withdrawn Taxed as income
  3. 3. Traditional IRA <ul><li>What is it? </li></ul><ul><ul><li>Individual retirement savings, </li></ul></ul><ul><ul><li>which allows contributions </li></ul></ul><ul><ul><li>to be tax deductable </li></ul></ul><ul><ul><li>in the year which they are made </li></ul></ul><ul><li>Who qualifies? </li></ul><ul><ul><li>Anyone under the age of 70 ½ </li></ul></ul><ul><ul><li>Must have income </li></ul></ul><ul><li>Contribution </li></ul><ul><ul><li>Up to $5,000 </li></ul></ul><ul><ul><li>Over 50 years of age 6,000 </li></ul></ul>
  4. 4. Traditional IRA <ul><li>Deductions </li></ul><ul><ul><li>Eligible for full deduction if AGI is less than $56,000 </li></ul></ul><ul><ul><li>Does not qualify for deduction if AGI is more than $66,000 </li></ul></ul><ul><li>Withdrawal </li></ul><ul><ul><li>Begin to withdraw earnings at age 59 ½ </li></ul></ul><ul><ul><li>Funds withdrawn before 59 ½ subject to 10% penalty </li></ul></ul><ul><ul><li>Mandatory by the age of 70 ½ </li></ul></ul><ul><li>Ex: George, who is 34 years old, earns $24,000 in 2010 or 2011. His IRA contributions for 2010 and 2011 are limited to $5,000 </li></ul><ul><li>Danny, an unmarried college student working part-time, earns $3,500 in 2010 or 2011. His IRA contributions for 2010 and 2011 are limited to $3,500 </li></ul>
  5. 5. Roth IRA <ul><li>What is it? </li></ul><ul><ul><li>Individual retirement plan in which contributions are made with post tax dollars </li></ul></ul><ul><li>Who qualifies? </li></ul><ul><ul><li>Any individual with income </li></ul></ul><ul><ul><li>MAGI less than $107,000 single </li></ul></ul><ul><ul><li>MAGI less than $169,000 married </li></ul></ul><ul><li>Contribution </li></ul><ul><ul><li>$5,000 </li></ul></ul><ul><ul><li>Over 50 years of age $6,000 </li></ul></ul><ul><li>Deductions </li></ul><ul><ul><li>Contributions are not tax deductable </li></ul></ul>
  6. 6. Difference Between Traditional & Roth <ul><li>How the U.S government treats the tax </li></ul><ul><li>Ex: Traditional </li></ul><ul><li>If you earn $50,000 a year and put $2,000 in a traditional IRA, you will be able to deduct the contribution from your income taxes </li></ul><ul><ul><li>Only pay Income tax for $48,000 </li></ul></ul><ul><ul><li>Will be taxed on all the earnings withdrawn </li></ul></ul><ul><li>Ex: Roth </li></ul><ul><li>If you put the same $2,000 in a Roth IRA, you would not receive the income tax deduction </li></ul><ul><ul><li>Pay income tax for $50,000 </li></ul></ul><ul><ul><li>Upon withdrawal earnings will be 100% tax free </li></ul></ul>
  7. 7. What is a 401(K)? <ul><li>An employee can choose to have their employer to take a portion of the they employees wage to put into a pre tax basis. </li></ul><ul><li>These holdings are never subject to taxable income for the employees 1040 income tax return </li></ul><ul><li>Although these amounts are not treated as current income for federal income tax purposes, they are included as wages subject to social security, medicare, taxable and nontaxable income. </li></ul>
  8. 8. Types of 401(k) Plans: <ul><li>Traditional 401(k) plans . </li></ul><ul><li>Safe harbor 401(k) plans </li></ul><ul><li>SIMPLE 401(k) plans </li></ul>
  9. 9. Who Can’t Participate? <ul><li>Have not attained age 21 </li></ul><ul><li>Have not completed a year of service </li></ul><ul><li>Are covered by a collective bargaining agreement </li></ul>
  10. 10. Profit Sharing Plans <ul><li>A plan that gives employees a share in the profits of the company. Each employee receives a percentage of those profits based on the company's earnings. </li></ul><ul><li>Employees can claim their contributions as deductions from AGI </li></ul>
  11. 11. Pros/Cons for Profit Sharing <ul><li>Pro-A great way to give employees a sense of ownership in the company </li></ul><ul><ul><ul><li>Makes employees feel involved </li></ul></ul></ul><ul><li>Pro-Contribution amount is not fixed. </li></ul><ul><li>Con- Difficult restrictions when wanting to take out money </li></ul>
  12. 12. Defined Benefit Plans <ul><li>What is it? </li></ul><ul><ul><li>An employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history </li></ul></ul><ul><li>Type of businesses that Qualify </li></ul><ul><ul><li>Sole proprietorships </li></ul></ul><ul><ul><li>S & C corporations </li></ul></ul><ul><ul><li>Partnerships </li></ul></ul><ul><li>Contributions </li></ul><ul><ul><li>100% of contribution made by employer </li></ul></ul><ul><ul><li>Tax deductable </li></ul></ul>
  13. 13. ESOP <ul><li>What is it? </li></ul><ul><ul><li>Is an employee benefit plan which makes the employees of a company owners of stock in that company </li></ul></ul><ul><li>Who qualifies </li></ul><ul><ul><li>Full time employees with a year or more of service </li></ul></ul><ul><li>Contribution </li></ul><ul><ul><li>Company contributes 25% of covered payroll to ESOP </li></ul></ul>
  14. 14. 403(b) Plans <ul><li>“ A 403(b) plan is a retirement plan for certain public school employees, employees of tax exempt organization and ministers. Individual 403 b accounts are established and maintained by eligible employees.” </li></ul>
  15. 15. 457 Plan <ul><li>What is it? </li></ul><ul><ul><li>is a retirement or pension plan that provides benefits to government employees as well as employees of tax-exempt organizations. </li></ul></ul><ul><ul><li>  Money placed in these accounts grows on a federally tax-free basis until withdrawn (pro) </li></ul></ul><ul><li>Contribution </li></ul><ul><ul><li>Under age of 49 $16,500 or 100% of compensation </li></ul></ul><ul><ul><li>Over the age of 50 $22,000 </li></ul></ul><ul><li>Deductions </li></ul><ul><ul><li>Contributions reduce taxable income </li></ul></ul><ul><ul><li>Do not need to claim a tax deduction </li></ul></ul>
  16. 16. Bibliography <ul><li>http://www.investopedia.com/terms/p/profitsharingplan.asp#ixzz1XDgLv7OM </li></ul><ul><li>http://www.investopedia.com/university/retirementplans/403b/#ixzz1XDjC2bYg </li></ul><ul><li>http://money.cnn.com/2000/03/23/pensions/q_retire_457/ </li></ul><ul><li>http://bwise.ibforums.com/index.php?showtopic=3817 </li></ul><ul><li>www.irs.gov </li></ul>

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