For the longest time a retirement plan was the most important employee benefit to offer. Today it is number two behind health insurance which is mandated by law. Still, it is a sought after benefit by employees and an excellent recruitment and retention tool for employers. There are two broad groups of retirement plans.
Individual Retirement Account
Individual Retirement Accounts’ are a function of Congresses’ desire to ensure access for all employees to funding their retirement. IRA’s operate in a similar fashion to Section 408 retirement plans. Individuals are limited to a tax deductible contribution of $5,500 or $6,500 if age 50 or older. There are conditions and restrictions involved but the best value relates to the long term tax deferral of earnings throughout the life of the investment.
The American Benefits Council estimates that about 80% of all American workers have access to an employer sponsored retirement plan. This means that 20% of the workforce has no access to a formal retirement plan. To alleviate this issue, Congress created laws allowing those with earned income access to a retirement via Individual Retirement Accounts or more commonly called IRA’s.