When it comes to retirement plans and bankruptcy, there are many important terms to know. Some you may have heard of but others might be new. Familiarize yourself with these terms in today’s blog, brought to you by the expert attorneys at Groce & DeArmon, P.C.
Pension can be summed up as the benefits paid to you after retirement, typically in fixed amounts. A pension created by an employer for the benefit of an employee is commonly called an occupational or employer pension. Do not confuse pensions with severance pay. If you lost your job through no fault of your own, you may receive a severance package, which could include payment for unused PTO, Holiday pay, or sick leave.
A Keogh plan is a type of retirement plan for self-employed individuals and small businesses. Unlike other retirement plans, a Keogh plan has higher contribution limits for some individuals. With higher contributions limits than 401(k) plans, Keogh plans are a popular choice for many successful business owners.
A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement savings plan for certain employees of public schools, some non-profit organizations, and certain U.S. ministers. Individual accounts in this plan can be an annuity contract provided through an insurance company, a custodial account invested in mutual funds, or a retirement income account for church employees. Only employers can set up 403(b) accounts — you can’t set one up on your own.
Related Post: Main Causes of Bankruptcy Among the Young and Tips to Avoid It
An Individual Retirement Account (IRA) is a type of savings account that helps you save for retirement and offers many tax advantages. The two types of IRAs are traditional and Roth IRAs, which offer different tax benefits.
With a traditional IRA, contributions are generally tax-deductible, but you have to pay taxes when the money is withdrawn. With a Roth IRA, contributions are taxed, but withdrawals are generally tax-free. You can contribute to a traditional IRA or Roth IRA retirement plan at any age, but you cannot withdraw the funds — without penalty — until you have reached retirement age.
ERISA stands for the Employee Retirement Income Security Act of 1974. It is a federal U.S. tax and labor law that establishes minimum standards for pension plans in private industry. ERISA applies to employees’ rights to health insurance, disability insurance, life insurance, and other employer-sponsored benefits. However, it does not cover individual insurance or government sector insurance.
‘Lien’ means the right to dispose of the property. A tax lien is the government’s claim on your property and is generally placed when a taxpayer, such as a business or individual, fails to pay taxes owed. This does not mean that taxation authorities will seize your property. It just guarantees that they get first right to your property over other creditors. The IRS has 10 years to collect that tax deficiency.
Related Post: What You Should Know About Bankruptcy and Retirement
Contact Groce & DeArmon, P.C. for a Consultation
If you are looking for legal assistance, such as bankruptcy protection, we want to represent you. At Groce & DeArmon, our attorneys will work with you to make the retirement process less stressful. We offer a free consultation for all clients. You can reach us toll-free in Missouri at 1-800-640-3706.