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Retirement Plans

Secure a Comfortable Retirement

Rely on the experienced professionals at American Trust Center to help you secure a comfortable retirement with an Individual Retirement Account (IRA):

  • IRA - Traditional Individual Retirement Accounts are accounts established by an individual who wants to start a retirement savings plan and avoid income on the contributions and earnings until withdrawn. Generally, most individuals may contribute up to $5,500 (2013). If you are a participating member of a qualified plan, your contribution may not be deductible. Recent tax law changes allow individuals who attain age 50 by the end of the year to make an additional "catch-up" contribution of $1,000 (2013).
  • Rollover IRA - If you are changing jobs or retiring, you may want to consider "rolling" your account balance from your employer sponsored retirement plan into an IRA. You may also want to consider consolidating your retirement assets by combining your IRA’s. This type of account provides the owner with flexibility and options that may not be available within a retirement plan.
  • Roth IRA –  With a Roth IRA, the contributions are not tax deductible like a traditional IRA, however, the earnings on the contributions are tax deferred and in most cases can be withdrawn TAX-FREE provided you are at least 59 ½ years old at withdrawal and the contributions have remained in the account for at least five years. If you are single, head of household, or married filing separately, your contribution limit begins to phase out when your modified AGI (adjusted gross income) reaches $112,000 and is zero at $127,000. If you are married, filing jointly, or a qualified widow or widower, your contribution limit begins to phase out when your modified AGI reaches $178,000 and is zero at $188,000. The contribution limit is the same as a traditional IRA $5,500 (2013). Catch-up contributions apply to Roth IRA’s as well.
  • Roth Conversions – For higher wage earners, this is a prime opportunity to convert money into a Roth IRA. Staring in 2010, the income limit on conversions was lifted. From 2011 on, everyone will be allowed to convert to Roth IRA accounts from Traditional IRAs.  That means that more than 15 million Americans, can consider whether they want to make tax-deductible contributions if they have a traditional IRA or pay the taxes up front and have tax- free withdrawals during retirement with a Roth IRA. Which is better depends on future tax rates and how much the conversion will cost. It may not make sense to pay taxes today at a higher rate because many investors will be in a lower tax bracket during retirement.
  • Partial conversions may also be desirable for those with larger portfolios.  The flexibility of partial conversions can also be beneficial to those who are self-employed or whose income varies year to year. In a year with less income, an investor can convert less of a traditional IRA to avoid having a larger tax burden for the year.

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Retirement for your employees

Have you considered a retirement plan for your employees? We offer a number of plans, depending on the size of your business and the type of benefit you want to provide:

  • Simplified Employee Pension Plans - SEP Plans are plans designed for smaller businesses. There are generally lower costs involved with establishing and maintaining this type of plan, and less reporting than other plans. SEP contributions are tax-deductible for employers. SEPs require little paperwork and are easy to administer. Employers determine how much to contribute, as long as the percentage of contributions is equal for all employees based on their income. As an employer, you can change contribution levels annually, including not contributing at all. Contributions are limited to the lesser of 25 percent of an employee's compensation or $51,000 (for 2013). As with other IRA's, the contribution and earnings are only taxed when withdrawn.
  • Simple IRA - This type of plan is available to employers with less than 100 employees. The IRA is funded with both employee and employer contributions made directly to the employee's IRA. Employees can defer up to $12,000 (2013) and the employer must either: a) Match the employee's deferral up to 3% of pay, or b) Make a 2% non-elective contribution to all employees. As with other IRA's the contribution and earnings are only taxed when withdrawn, but an additional penalty of 25% applies if withdrawn in the first 2 years.
  • Traditional 401(k)Plans - There are various types of 401(k) plans which an employer can adopt and range from standardized to comprehensive non-standardized. With 401(k) deferrals, employees enjoy tax savings when these deferrals are deducted from their paychecks pre-tax. It is easy, convenient, and the employees can direct how they want their accounts invested. The deferrals and accumulated earnings continue to grow tax-deferred until withdrawn (normally at retirement). Employers have discretion and may elect to match the employees' deferrals. Also, employers may elect to subject the matching contributions to a vesting schedule - meaning that employees need to work a required number of years to earn the matching contribution. Recent tax law changes allow individuals who attain age 50 by the end of the year to make an additional "catch-up" contribution of $5,500 (2013).
  • Roth 401(k) Plans - The Roth 401(k) plan came into effect January 1, 2006. Roth 401(k)s are after-tax contributions made to a 401(k) plan. However, Roth 401(k) plans are tax-sheltered accounts, which means the money grows tax free in the account, and you are allowed to take the money out tax-free at retirement provided you meet the conditions of a “qualified” withdrawal. Generally, the money has to have been in the account for 5 years and the participant has attained age 59 ½.
  • Safe-Harbor 401(k)Plans - This type of plan operates similar to a traditional 401(k) with entry and service requirements, yet it significantly benefits business owners by eliminating the need for annual IRS nondiscrimination tests that limit contributions made by highly compensated employees (HCEs). In a Safe Harbor 401(k) plan, the limitation is waived, allowing owners, executives and highly compensated individuals to defer up to the maximum salary amounts. In exchange for these benefits to owners and highly compensated key employees, Safe Harbor-plans require fully-vested minimum "employer" contributions for all non-highly compensated employees who make or are eligible to make elective deferrals. These minimum contributions may be made in the form of elective matching contributions to all participating employees or a flat contribution to all eligible employees. The Elective Employer Safe Harbor matching contribution is dollar for dollar on the first 3 percent deferred by each non-HCE and 50 percent on the dollar for the next 2 percent deferred, for a total of 4 percent or 5 percent of employee deferrals. The other method of contribution is Employer Safe Harbor nonelective contributions of 3 percent of compensation for each non-HCE eligible to make salary deferrals, regardless of participation. These contributions are available for both HCEs and non-HCEs. Safe Harbor participant notices must be given to employees before each Safe Harbor plan year, and plan documents must address the Safe Harbor provisions.
  • Profit Sharing Plans - Like the name states, employers determine how much of the company's profits they elect to "share" with their employees. The contribution is allocated pro-rata to all eligible participants. Employer contributions are limited to the lesser of 25 percent of compensation or $51,000 (2013) per participant and are tax deductible to the employer. Like deferrals, contributions to a Profit Sharing Plan grow tax-deferred.

2013 Cost of Living Adjustments (contribution limits)