Essay: Retirement Plans

Essay: Retirement Plans
08/06/2011 Comments Off on Essay: Retirement Plans Academic Papers on Business Studies,Sample Academic Papers admin

Sample Essay

There are various retirement plans available at the disposal of an individual which have some similarities and differences. The three most common retirement plans are 401k, traditional IRA and Roth IRA. A 401k is the most common retirement plan use by individuals and is financed and managed by employees in a company. The 401k has various tax saving implications and the contributions of a 401k are matched by an employer. 401k provides an option where a loan can be taken out of the fund in case of emergencies.

The tax savings for 401k come in the form of deferred taxes where the savings in a 401k are not taxable until they have been withdrawn after retirement. An IRA is quite similar to 401k with respect to tax savings as the taxes on savings in IRA are also deferred. A Roth IRA is a form of IRA which provides even more tax benefits than a traditional IRA in that it provides taxation on both current savings and when these savings are withdrawn.

The 401k plan is usually preferred by individuals as it has a greater advantage in terms of contribution to the fund. The contribution of the employee are matched by the employer which means that if an employee contributes $100 to a 401k account the employer will also contribute the same amount which would double the contributions and eventually provide higher amount of funds in the post retirement period.

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