Many people think IRA (individual retirement accounts) are just for individuals, but the truth is, companies can set up and fund an IRA up for their employees. IRAs are easy to set up and maintain, there is very little paperwork, and it requires very little involvement from the employer. Depending on the plan, it may be funded through the employer or employee. The amount received at retirement can vary based on how the account is funded and the earnings produced by the investment.
- Payroll Deduction IRA
- SIMPLE IRA Plan
Defined contribution plans are individual accounts set up the by the employer. This plan allows the employee and employer to share the contribution amount over time. The most popular type of this account is a 401(k). The investment risk burden is placed on the shoulders of the employees so by retirement age, account funds can vary based on how much is contributed, plus how the investments react.
- Safe Harbor 401(k) Plan
- Automatic Enrollment Safe Harbor 401(k)
- Profit Sharing
A defined benefit plan is the opposite of a defined contribution plan. This account promises a certain amount per month once the employee reaches age of retirement. Each company sets a formula that results in a certain amount of income, usually based on the amount of time an employee is employed with the company. This plan is generally employer-funded. Companies are now leaning away from defined benefits plans because they are complex and costly to maintain.
- Defined Benefit Pension Plan