Simply put, a retirement plan is designed to replace an individual’s income after retiring. These plans may be set up by employers, insurance companies, trade unions, state and federal government, or other institutions. There are many tax advantages available to investors within all these categories. Sorting through tax code and understanding how to best take advantage of the legal ways to make the tax laws work in your favor can save a bundle.
Tax advice is central to retirement planning
Defined Benefit Retirement Planning
In a defined benefit (or pension) plan, benefits are calculated using a fixed formula that factors in the employee’s final pay and service with an employer. Payments are made from a trust fund specifically dedicated to the plan, which is chosen by the employer. Employers can responsibly select mutual and trust funds by following the advice of King Financial Corporation.
Defined Contribution Retirement Plans
By contrast, in a defined contribution plan, each employee/investor has an account, and the benefit for the individual is dependent upon the amount of money contributed into the account (by the individual employee AND the employer) and the performance of the investments purchased.