Resources

401(k)'Profit Sharing

Employees who qualify^3,7

Depends on the plan2,4

IRA

Those who don't have company pension plans or who have put the pre-tax maximum into their company plans

Always permitted^2,5

SEP

Self-employed person who is a sole proprietor^1,7

Always permitted^2,5

SIMPLE PLAN

Employers with 100 or fewer employees who earned $5,000 during the preceding year^{7, 10}

Depends on plan

PROFIT-SHARING KEOGH

Small-business owner who is funding a plan for himself and employees. Contributions are discretionary.^1,7

Depends on plan2,6

MONEY-PURCHASE KEOGH

Small business owner who is funding a plan for himself and employees. Contributions are required to be made each year.^1,7

Depends on plan2,6

DEFINED BENEFIT KEOGH

Self-employed person nearing retirement who needs to fund a larger retirement benefit^1,7

^{Depends on plan2,6}

VARIABLE ANNUITY

Someone who has put the maximum into other plans and who won't need the money for at least 10 years⁸

Always permitted^2,5

FIXED ANNUITY

Someone who has put the maximum into other plans, prefers a fixed rate of return and who won't need the money for at least 10 years⁸

Always permitted^2,5

CASH-VALUE LIFE INSURANCE

Someone who has put the maximum into other plans, needs additional insurance coverage, and who won't need the money for at least 10–12 years⁸

Permitted by surrendering your policy⁴

NONQUALIFIED DEFERRED COMPENSATION

Everyone who qualifies⁹

Generally, only for hardship, but depends on plan

TAX EXEMPT INVESTING

Individuals who are in at least the 25% federal marginal income tax bracket

Always permitted

Notes:

1. Small-business owners fund the SEPs and Keoghs of their employees.
2. Amount of withdrawal is subject to 10% income tax penalty (if applicable), except in case of death or disability.
3. Matching contributions—Anywhere from 0% to 100% of percentage of employee's contribution, but typically anywhere up to 6% of salary.
4. Loans may be permitted.
5. Loans not permitted.
6. Loans may be permitted.
7. Tax break on contributions and earnings.
8. No tax break on contribution, earnings grow tax-deferred.
9. Taxes postponed on deferred earnings.
10. Matching contributions required—up to 3% of employee's wages or $6,000, whichever is less.