8) The United States does not treat individual savings arrangements (40lKs) generously, although it does have a catchup provision for older contributors, and its tax-deferred contribution
limit for defined-contribution pension plans is US$53,000.
The details of the GOP plan haven't been released yet, but The New York Times reported that Republicans are talking about cutting the annual, tax-deferred contribution
from the current $18,000 per year for people under 50 ($24,000 for people 50 or older) to a measly $2,000 a year.
1) Tax-deferred contribution
levels are significantly higher than the $5,000 (in 2009) limit for traditional and Roth IRAs (see Chapter 6).
This 401(k) provides higher tax-deferred contribution
limits than other common retirement options and, when offered within our variable annuity products, is an ideal solution for individuals who want an innovative, guaranteed living benefit that can establish a steady lifetime income stream in retirement.
Traditional Individual Retirement Account (IRA) - Allows qualifying individuals to annually make a $2,000 tax-deductible and tax-deferred contribution
toward their retirement.
GOP lawmakers have been considering changes to the 401(k) structure, such as limiting the amount of tax-deferred contributions
employees can make, as a way to help finance tax cuts.
Without this safe harbor, low plan participation among middleand lower-income workers might limit allowable tax-deferred contributions
from key employees of the sponsoring company, including the business owner or owners.
(federal and state income tax, where applicable),
Catch-up contributions are additional tax-deferred contributions
and are separate from regular TSP contributions.
A solo or self-employed 401(k) combines a profit-sharing plan with a 401(k) plan and allows a sole owner-employee to make greater tax-deferred contributions
than would be permitted under the others.
Fortunately, a 401(k) look-alike plan allows executives to overcome this discrimination by permitting tax-deferred contributions
to a nonqualified retirement plan.
Most Americans are now familiar with 401(k) plans epitomized by employee tax-deferred contributions
(often with a company match).