One of the best methods of saving for your later years is through retirement plans. A large number of company retirement plans fall into the category of qualified plans. Qualified plans offer excellent tax advantages for both companies and employees. As long as your retirement plan meets certain prerequisites, you can defer taxes on the amount of money that you contribute to the plan until you start taking distributions, which might not happen for many, many years. And for any money that they put into the plan, employers obtain a tax deduction.

So the benefits to you are that you save a specified amount of money every year, receive income tax breaks on income that goes into the plan, and in some cases, your employer matches part or all of your contribution.

Personal Plans

There are many personal retirement plans available for you to choose from, including an assortment of Traditional Individual Retirement Accounts (IRAs) which are tax-deferred savings accounts. You can contribute $3,000 (for 2003) to your IRA on an annual basis. This number will rise to $4,000 in 2005, then to $5,000 in 2008. StateTrust can assist you with the creation of your own customized retirement plan, one that takes into account:

		Exactly how much money you will need to retire comfortably and preserve your lifestyle
		Your goals at retirement such as travel, the purchase of new homes, starting a business
		Changes to your current lifestyle like moving closer to be near family or going back to school for a new degree

Simple IRA

Designed especially for businesses that have 100 employees or less, savings incentive match plans, or SIMPLE IRAs became available in 1997. Employees are allowed to make bigger contributions to these plans than they would be able to with regular IRAs as long as the firm does not offer any other retirement plan. SIMPLE plans can be 401(k)s or IRAs.

And the fact that they are less complex and costly in terms of administrative needs and offer fewer restrictions than conventional profit-sharing or pension plans, also makes them an attractive alternative for small-business owners, who will not have to undergo nondiscrimination testing, file Form 5500 for the Internal Revenue Service (IRS) on an annual basis, or follow strict regulations for employee contributions.

Characteristics of a Simple IRA

1.	Employees with a minimum compensation of $5,000 (who have received at least $5,000/compensation in two previous years) can partake in a qualified salary reduction arrangement that lets them contribute to an IRA and defer taxes until the money is withdrawn. The maximum employee contribution is $8,000 (for 2003) or total compensation, whichever figure is lower. Over time, the maximum may increase to allow for cost-of-living adjustments.
2.	If you are 50 years of age or older at the end of the taxable year, you can contribute another $1,000 as a catch-up or extra contribution (for 2003). You are 100% vested in the plan straight away, and can select from a variety of investments.
3.	Employers can match contributions up to a level of 3% of eligible employees’ compensation (for two years out of five, employers can elect to match 1%-3%). Or they can make a mandatory contribution of 2% of eligible employees’ salaries. The maximum employer contribution is $4,000 (for 2003). $200,000 is the highest level of employee compensation that can be included. Employer contributions are tax-deductible.
4.	Once you are 59 ½ years old you can take penalty-free withdrawals, although you will pay income taxes. You can also make these withdrawals in the event of disability, death (your beneficiaries get the distribution), health insurance premiums due (certain unemployed individuals), higher-education expenses, qualified first home purchase ($10,000 lifetime limit), certain medical expenses over 7.5% of your Adjusted Gross Income. Any withdrawals before age 59 ½ are subject to a 10% tax penalty (25% if withdrawn within the first 2 years of plan participation), plus income taxes.
5.	After age 70 ½, minimum distributions are mandatory by April 1 of the following year and must be paid out by December 31 of each following year.
6.	Self-employed individuals can also take advantage of these plans. SIMPLE IRAs must be set up before October 1 of the calendar year. Employer contributions are due on the deadline for filing taxes, with extensions included.

Suitable for:

		“C” corporations
		“S” corporations
		Sole proprietors
		Partnerships
		Nonprofit organizations