Qualified Retirement Plans Graduating Students Should Learn About

qualified retirement plans

Qualified retirement plans

Graduating seniors who opt to work on a full-time job or start their own business should consider learning about the qualified retirement plans available for individuals. Each of these retirement plans offers specific features that may suit the requirements of the account holder.

One of the best qualified retirement plans for fulltime employees is the 401k under which, they can make contributions on a pre-tax or post-tax basis, depending on the plan document. The earnings that the fund will make on its investments are tax deferred. You can take advantage of the tax delays and contribute a higher amount towards your retirement savings. However, bear in mind that contributions made before tax will incur tax deductions at the time of distribution. Further, any early withdrawals prior to the qualified retirement age will attract penalties.

Different qualified retirement plans have their own set of rules and restrictions that may work to your advantage

After graduation, if you have plans to set up a business in any of the prominent industries, you’ll be eligible to open a SEP IRA or a simplified IRA, allowing tax-deferred contributions. For small scale businesses with no employees, the best among the qualified retirement plans is the self directed IRA, or specifically a Solo 401k under which, you can make contributions either on a tax-deferred or post-tax basis.

The best feature of this plan is that you, as the plan holder, have the say on what type of business you like your funds to be invested in, unlike other retirement plans where you require custodian consent. You can apply your own expertise and the things you learned in college on how to grow your savings wisely. In other words, you have the total control on everything related to your account.  This plan also allows a holder to avail an individual 401k loan.

If there are seminars taking place in your campus or anywhere near your area, it is best to register yourself and listen to the discussions about the different retirement packages that you are entitled to have as you build your career.