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Defined Contribution Plans - Saving for Retirement in Your Working Years

Retirement plans share some characteristics, but each has unique features.

Mesa 4/23/2019 10:00:00 AM

Employers who sponsor defined contribution plans have the right to automatically enroll you in their plan. With automatic enrollment, your employer decides the percentage of your salary that you contribute—often 3% with a built-in annual increase—as well as the type of investment you initially make: a target date fund, a balanced fund, or a managed account. If you don’t want to participate in the plan, you can refuse in writing. If you do participate, you have the right to change the default investment and the percentage you contribute.

401(k) Plan - at public and private companies and nonprofit organizations Annual contribution limits and vesting rules

Balances portable when leaving job

Transfers into plan may be possible

Tax-free Roth option may be available in addition to tax-deductible plan

403(b) Plan - at nonprofit organizations

Annual contribution limits and vesting rules

Balances portable when leaving job

Transfers into plan may be possible 


Expanded opportunities to make catch-up contributions 


Tax-free Roth option may be available in addition to tax-deductible plan

457 Plan - for state and municipal workers

Annual contribution limits and vesting rules

Balances portable when leaving job

Transfers into plan may be possible 


Expanded opportunities to make catch-up contributions

TSP Plan - for federal employees and at some public and private companies

Annual contribution limits and vesting rules

Balances portable when leaving job

Transfers into plan may be possible 
Tax-free Roth option available in addition to tax-deductible plan

Simple IRA/401(k) Plan – public & private companies 100 employees or less

Matches are mandatory


Simple IRAs have lower contribution limits than other plans

Balances portable when leaving job

Profit Sharing/Money Purchase Plan - public & private companies

Contribution limits higher than with most other plans 


Money purchase but not profit sharing plans require annual contributions

Assets can be rolled over to an IRA

Contributions from the book Guide to Understanding Life Insurance in this press release are used with permission from Light Bulb Press.

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