RETIREMENT
An IRS Approved tax- sheltered retirement plan offered by an employer.
What is an employer-sponsored retirement plan
When the annual investment gains exceed an individual's yearly contributions
What is crossover point?
Retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of each of its employees
What is defined-contribution retirement plan?
Schedule under which employees must be at least 20 percent vested after 2 years of service and gain an additional 20 percent of vesting for each subsequent year until, at the end of year six, the account is fully vested
What is graduated vesting?
the time of life when the major sources of income (such as salary or wages) change to sources like private savings and investments and income from Social Security..
What is retirement?
The individual does not have to pay current income taxes on the earnings (interest, dividends, and capital gains) reinvested in a retirement account.
What is Tax deferred?
money to fund this retirement plan is contributed only by the employer
What is a noncontributory plan?
upon termination of employment, an employee can transfer the retirement funds, when done according to certain rules, from the employer's account to another tax-sheltered account without taxes or penalty
What is portability?
Funds put into regular investment accounts after paying income taxes.
What is after-tax money?
When the annual investment gains exceed the individual's yearly contributions
What is crossover point?
employees control the assets in their account- how often to make contributions to the account, how much to contribute, how much risk to take, and how to invest
What is a self directed plan?
Retirement account for which all earnings from the invested funds are not subject to income taxes.
What is a tax sheltered retirement account?
Regulates employer-sponsored plans by calling for proper plan reporting and disclosure to participants in defined-contribution, defined-benefit, and cash-balance plans.
What is ERISA (Employee Retirement Income Security Act
Money to fund this plan is provided by both the employer and the participant or solely by the employee
What is a contributory plan?
Investing before income taxes are calculated, thus eliminating part of the income tax liability for the current year.
What is pretax money?
defined-contribution retirement plan and defined benefit
What are the two types of employer-sponsored retirement plans?
Ensures that a retirement plan participant has the right to take full possession of all employer contributions and earnings.
What is vesting