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Traditional IRA
A Traditional IRA is the original plan
created by Congress in 1981. All or part of your IRA
contribution is generally deductible from your gross
taxable income, depending on your income level. You can
claim the deduction even if you don’t itemize
deductions on your tax return.
With a Traditional IRA, your
contributions and associated earnings accumulate
tax-free. Funds are subject to taxation when they are
withdrawn, usually at retirement. You must begin
withdrawals by age 70½. A 10% tax penalty may
apply to withdrawals taken prior to age
59½.
Learn about Lincoln products that support Traditional IRA
Plans.
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Roth
IRA
The Roth IRA is available to individuals with
earned income regardless of their participation in any
other type of qualified retirement plan. A Roth IRA
contribution can be made by a person of any age, as long
as the contributor is otherwise eligible. Unlike
contributions to a Traditional IRA, contributions to a
Roth IRA may be made even after age
70½.
A Roth IRA consists of
nondeductible after-tax contributions. The contributions
and earnings are tax-exempt (provided certain
requirements are met). The tax law’s minimum
distribution rules for Traditional IRA owners over age
70½ don’t apply to Roth IRAs. So, you can
keep your money in a Roth IRA as long as you
want.
Learn about Lincoln products that support Roth IRA
Plans.
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401(k)
Also known as a salary reduction plan, a
401(k) is a systematic way to save for
retirement. Many businesses now offer 401(k) plans
as the primary retirement savings option for their
employees. Many companies match a portion of their
employees’ contributions to a 401(k) plan.
401(k) plans can be very effective in building
retirement security because of their excellent tax
advantages. No federal income tax and, in many cases, no
state and local income tax, is due on contributions and
any investment earnings until funds are withdrawn from
the plan.
Employee’s pretax contributions
to a 401(k) plan also reduce an
employee’s amount of taxable income by an equal
amount. That creates additional savings because the
distribution received at retirement is likely to be taxed
at a lower rate than when the employee was
working.
The Internal Revenue Service imposes
strict rules when withdrawals are taken before age
59½. If the rules aren’t met, there’s
a 10% penalty and tax is due on the before-tax portion --
earnings on employee contributions, the employer’s
matching contributions and their earnings -- of the
amount withdrawn.
Learn about Lincoln products that support 401(k)
Plans.
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403(b)
Tax-deferred growth of retirement income and pretax
contributions - those are two big reasons why employees
of public schools, hospitals, colleges and universities,
and certain nonprofit organizations participate in
403(b) annuities.
Issued by an insurer, a
403(b) provides a sound way for employees of
such organizations to build long-term investments. With a
tax-deferred annuity, "annuitants" receive the benefit of
tax-deferred compounding for as long as they keep their
money invested in the annuity.
With a 403(b), your annual
taxable income is less and your annuity's earnings are
taxed only at withdrawal. Payroll deduction makes it easy
to contribute on a regular basis. Most employer-sponsored
plans offer fixed and variable investment
options.
Learn about Lincoln products that support 403(b)
Plans.
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457
These plans are available to employees of city or state
governments. A 457 deferred compensation plan
permits employees to defer taxes on both income they
invest and the earnings of their investment until some
later date.
With a 457 deferred
compensation plan, you may set aside up to 100% of your
annual salary. Your annuity's earnings are taxed only at
withdrawal.
The employer chooses where to place
employee funds — in a guaranteed fixed account or
one of many mutual funds that differ in investment
objectives and performance results.
Learn about Lincoln products that support 457
Plans.
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401(a)
Tax-deferred growth of retirement assets and
tax-advantaged contributions -- those are two main
reasons why employees at private and publicly held
companies participate via payroll deduction in
401(a) Defined Contribution
annuities.
Many employers match a specific
percentage of employee contributions. With a
401(a) annuity, by setting aside a specified
amount of your pay, you receive tax benefits on your
contributions and your annuity's earnings are taxed only
at withdrawal.
Learn about Lincoln products that support 401(a)
Plans.
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SEP
Simplified Employee Pension plans are tax-deferred
retirement accounts. SEP plans are provided
by sole proprietors or small businesses and corporations
that have no other retirement plan.
A SEP is a simple way
employers can take advantage of tax-deferred retirement
benefits for their employees.
Learn about Lincoln products that support SEP
Plans.
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Qualified
A qualified retirement plan is one that meets the
numerous requirements of the Internal Revenue Code (IRC)
and the Employee Retirement Income Security Act of 1974
(ERISA). Plans meeting these requirements qualify for
four important tax benefits.
First, employers may deduct allowable
contributions in the year they were made on behalf of
plan participants.
Second, plan participants may exclude
contributions and all earnings from their taxable
income until the year they are withdrawn.
Third, earnings on the funds held by
the plan's trust are not taxed to that trust.
And fourth, many times participants
and/or beneficiaries may further delay taxation on a
plan's benefits by transferring those amounts into
another tax-deferred vehicle such as an Individual
Retirement Arrangement (IRA).
A qualified retirement plan falls
into one of three general categories: A defined benefit
plan, a defined contribution plan, or a hybrid
(combination) plan.
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Nonqualified
A nonqualified retirement plan is one that does not meet
the requirements of the IRC or ERISA. These plans may be
"discriminatory" in their application and are typically
used to provide deferred compensation to key personnel.
Because these plans allow a broader flexibility to the
employer, they do not receive the same favorable tax
treatment as that permitted qualified plans.
In some situations the employee may
face immediate taxation on the benefit even when the
funds will not be received until much later in the
future.
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