Employer retirement savings and benefit plans

types of investment plans logoChances are, you came here because your employer offers some sort of retirement savings plan, specifically a 401k. However, it may be beneficial for you to understand the several different types of savings plans offered by various employers; These plans can be split into a couple of different major categories – Defined Contributions and Defined Benefits. Defined contributions are things such as your 401k, where you are responsible for managing how your money is invested. Defined benefits are like pension plans, where your employer guarantees you a set amount of money upon retirement, to be paid in fixed increments (similar to social security, but this is managed privately instead of by the government) and managed by the employer.

Other defined contribution plans include 403(b)s (similar to 401(k)s, however, these are only used by non-profit orgainzations), 457 plans (available to state and municipal empoyees and similar to 401(k)s and 403(b)s, however these allow larger catch-up adjustments), and SIMPLEs (Savings Incentive Match Plans for Employees for organizations with less than 100 employees).

Some employers do not offer any of the above, in which many people choose to “create their own” by using IRAs (individual retirement accounts). Here is a great article on Traditional IRAs.

I will expand upon this subject in my later lessons.


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