Retirement Accounts (IRA'S, 401k's, 403b's)

Tax-advantaged accounts

Traditional IRA'S, Roth IRA'S, 401k's and 403B'S

$7,500.00

"Catch up" amount (Contribution) allowed for 401k and 403b account holders aged 50 and older in 2023.

$6,500.00

Contribution limit for a traditional IRA and Roth IRA in 2023. (Under age 50)

$22,500.00

Maximum contribution an individual younger than 50 can make to a 401k and 403b in 2023.

600,000

Number of 401k plans as of 2021.

60 Million

Number of workers enrolled in a 401k plan as of 2021.

401k Direct Rollover

Assets are made payable to the qualified plan or IRA Custodian/Trustee, never to the individual. 100% of the 401k assets are transferred to new plan.

Short Term Capital Gains

Gains from the sale of stocks you have held for one year or less. Taxed at ordinary rate (Current income tax bracket). 10%, 12%, 22%, 24%, 32%, 35% or 37%.

$1,000.00

"Catch up" amount (Contribution) allowed in 2023 for traditional IRA and Roth IRA account holders older than 50 years of age.

Tax deductible contributions.

Contributions made to traditional IRA'S, 403b's and 401k's that reduce taxable income.

Social Security

A federal program of disability and retirement benefits that covers most working people (71 million currently).

Traditional IRA

An individual retirement account (IRA) that allows individuals to direct pretax income, up to specific annual limits, toward investments that can grow tax-deferred (no capital gains or dividend income is taxed). No age limit, anyone with earned income can open an IRA.

403(b) plan

A retirement account for certain employees of public schools and tax-exempt organizations. Participants include teachers, school administrators, professors, government employees, nurses, doctors, firemen, police officers etc. (Public sector workers).

Realized Capital Gain

the gain that occurs when the owner of an asset actually sells it for more than he or she paid for it.

Age 73

Age at which traditional IRA holders must start taking required minimum distributions from their account.

$7.3 Trillion

Amount in assets invested in 401k accounts as of June, 2021.

defined contribution plan

Employees and employer pay a specific amount into the plan for each participant. Employer contribution often are based upon a percentage of salary or a percentage of profits. 401K and 403b are examples.

25% Penalty

Penalty levied on an account holder for failing to withdraw a RMD by the deadline. If error is fixed, penalty is reduced to 10%.

Roth IRA

An individual retirement plan that bears many similarities to the traditional IRA, but there are some differences: Contributions are not tax deductible and Distributions are tax free. There is no RMD.

Unrealized Capital Gain

An investment that hasn't been sold yet but would result in a profit (And be subject to a capital gains tax) if it were sold.

ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.

Age 50

The age at which traditional IRA'S, Roth IRA'S, 403 (B)'S and 401K'S allow individuals to make "catch up" contributions to their accounts.

Pension

A sum of money paid to people on a regular basis after they retire (Defined Benefit Plan).

Vesting

A term used to determine how much of your 401(k) funds (Employer contributions) you can take with you when you leave your company. Come in a variety of durations.

401k Match

Money an employer contributes to an employee's 401K retirement plan to match the employee's contribution. Could be 50%, 100% up to a certain amount.

Capital Gains Tax

A federal tax paid by businesses and investors when they sell stocks or real estate.

Required Minimum Distribution (RMD)

The amount you are required to withdraw from a traditional IRA, 403b and 401k once you reach retirement age, based on life expectancy. Age 73.

60 days

Time period within which 401k indirect rollover assets must be transferred to another plan to avoid taxation.

defined benefit plan

a pension plan in which the amount an employee is to receive on retirement is specifically set forth. Pension plan is an example.

tax-deferred income

investment earnings—such as interest, dividends, or capital gains—that accumulate tax-free until the investor takes constructive receipt of the profits.

$7,500.00

"Catch up" amount (Contribution) allowed for 401k and 403b account holders aged 50 and older in 2024.

$1,000.00

"Catch up" amount (Contribution) allowed in 2024 for traditional IRA and Roth IRA account holders older than 50 years of age.

Roth 401K

A defined contribution plan allowing employees to defer income by making after-tax contributions to a retirement account.

401(k) plan

A plan established by private employers to which eligible employees may make salary (salary reduction) contributions pre-tax basis. (Private sector workers).Most popular type of employer-sponsored retirement plan in America.

Age 59.5

Age at which traditional IRA holders can make withdrawals without penalty.

$6.9 Trillion

Amount in assets invested in 401k accounts as of September , 2023.

Hardship withdrawal exceptions for retirement accounts

An emergency removal of funds from a retirement plan, sought in response to what the IRS terms "an immediate and heavy financial need. Paying college expenses for you, your spouse, your children or grandchildren. Paying medical expenses. Paying for a first-time home purchase. Paying for the costs of a sudden disability. Adopting a child. Active military called to active duty.

401k Indirect Rollover

Check made to the individual. Distribution is subject to federal income tax withholding of 20% If check is not deposited within 60 day period into new IRA.

$7,000.00

Contribution limit for a traditional IRA and Roth IRA in 2024. (Under age 50)

Non Tax Deductible Contributions

Contributions made to a Roth IRA that do not reduce taxable income.

$23,000.00

Maximum contribution an individual younger than 50 can make to a 401k and 403b in 2024.

Long Term Capital Gains

Gains from the sale of stocks you have held for more than one year. Taxed at 0, 15 or 20% depending on your level of income.

700,000

Number of 401k plans as of 2021.

70 Million

Number of workers enrolled in a 401k plan as of 2021.

401(k) rollover

Occurs when an employee takes a distribution of cash or other assets from a 401(k) plan and then contributes it to another qualifying plan, IRA or 401(k) within 60 days.

$20,000.00

The average annual benefit received by someone on social security.

1978

The year the 401k was established.