Other IRA Accounts

This is the second part of IRA accounts that is going to help people to find the suitable ways for securing their life after retirement.

SIMPLE vs. SEP IRA

3- SIMPLE IRA:

A SIMPLE IRA is a retirement plan that may be established by employers, allows eligible employees to contribute part of their pre-tax compensation to the plan.

- Plan generally must be in existence by October 1st of the year for which contributions are made.

- Dollar contribution ceiling (for 2008) is $21,000.

- 100% of earnings for defined contribution plans.

- Negligible reporting duties.

There is a difference between SIMPLE IRA and SIMPLE Plans. SIMPLE plans have two types – a SIMPLE IRA and a SIMPLE 401(k). Both types have the same contribution limits, with increased catch-up contributions for people 50 or older.

4- SEP IRA:

SEP-IRA is a Simplified Employee Pension Plan, refers to a retirement plan specifically designed for self-employed people and small-business owners.

- Plan can be set up later.

- Dollar contribution ceiling (for 2008) is $46,000.

- 50% of earnings for defined contribution plans.

- Few reporting duties are imposed.

5- Education IRA:

It is a savings plan designed to serve both parents and guardians to receive tax-free savings on money earmarked for paying a child’s college education.

- Accept contributions only in cash.

- Cannot accept contributions of more than $500.

- Contributions are not tax-deductible but all deposits and earnings can be withdrawn without additional penalties or taxes.

An IRA is an excellent way to save money. Choose one of them and try it yourself. Whatever your best type is, keep accurate and detailed records.

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