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A Brief Introduction To Retirement Plans

By   January 19, 2017

As far as everyone is considered, retirement is one of the life's biggest reasons to worry. Retirement plans play a crucial role in providing a source of income in a person's retired years. Retirement can span up to a third of a lifetime. Retirement plans are much like saving for a 25-year vacation. To afford an expense of that magnitude a person needs to start planning early. Age has a critical impact on one's ability to save. You can explore California Trusts & Estates Attorneys, if you need help regarding estate planning.

There are three sources from where funds are drawn in order to pay expenses after retirement. These sources include the Social Security system, company retirement policies, and personal lifetime savings. There are several plans that can benefit employers and employees alike. A qualified retirement plan is a plan that meets the requirements of the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act of 1974 (ERISA). The plan attracts many tax benefits.

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A plan that does not meet the requirements of the IRC or ERISA is known as a non-qualified retirement plan. Such plans are typically used to provide deferred compensation to key employees. This plan allows wider flexibility to an employer and therefore, they do not receive tax deductions until the employee receives proceeds from the plan.

A defined benefit plan is a traditional company pension plan. The retirement benefit is determinable as a dollar amount or as a percentage of wages. These plans are funded entirely by the employer and the responsibility for payment of the accompanying benefits rests with the employer.