| In the big world of investing, it seems
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| | plans which allowed most of the same
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| we hear a lot about what securities to
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| | contribution limits as a 401(k).
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| invest in, but not as much about what
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| | Government or public employees often used
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| types of accounts to invest in. There are
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| | 457(b) plans for their contributions and
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| so many different types of investment
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| | for highly compensated employees there
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| accounts, each covering a different
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| | are 457(f) plans. This eventually changed
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| purpose, and new types of accounts seem
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| | to where 401(k) plans are now available
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| to be created weekly. What are some of
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| | to non-profit companies so more and more
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| the basic types of investment accounts
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| | of the non-profit sector are opening
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| and what can they do for you? This
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| | 401(k) plans for their employees. Taxes
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| article covers some of the accounts that
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| | on these types of plan can vary from one
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| are available currently and why you would
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| | plan to another, so it is best to consult
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| use each one.Retirement AccountsIRA
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| | your plan director or talk with the
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| stands for Individual Retirement Account.
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| | investment company that manages your
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| An IRA is meant for those who do not have
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| | employers plan.Education Savings
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| access to employer sponsored retirement
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| | PlansEducation plans have become
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| plans such as 401(k) plans or those who
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| | available in the past decade allowing
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| would like to contribute more than the
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| | parents to better save for their
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| maximum allowed by their employer plans.
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| | children's education. Instead of trying
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| Why choose an IRA? Tax-deferred growth is
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| | to set money aside in taxable savings
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| the answer. With a standard savings
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| | accounts, parents can now setup an
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| account, you have to pay taxes on the
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| | education savings account that has
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| interest or earnings that the account
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| | various tax advantages depending upon the
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| makes each year. An IRA, on the other
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| | type of account used. Choosing an
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| hand, doesn't require you to pay taxes
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| | education savings account depends upon
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| until the money is taken out in
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| | what your long-term goals are for the
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| retirement, thus leaving more money in
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| | money. There are three basic types of
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| the account to grow each year. In many
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| | education savings accounts, IRC section
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| instances you can also deduct your IRA
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| | 529 plans, the Coverdell Education
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| contributions on your taxes, giving you
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| | Savings Account (CESA) and the Uniform
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| further tax savings. It seems like a
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| | Gift to Minors Account (UGMA). Each plan
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| small thing especially when the account
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| | is tailored a little differently when it
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| balance is still small, but over time it
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| | comes to its tax advantages and who gets
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| makes a big difference. Investing $10,000
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| | the money from each plan, but each has
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| for 30 years in a regular savings account
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| | the same general purpose, to save for
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| with a 28% tax bracket and a 6% average
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| | your children or grandchildren's
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| growth rate will give you $35,565 whereas
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| | future.Medical Savings AccountsThere are
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| that same amount put into a tax-deferred
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| | three different types of accounts to help
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| account will give you $57,435.
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| | you save for healthcare costs, Flexible
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| Eventually, however, you do have to pay
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| | Spending Accounts (FSA), Health
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| taxes on the earnings in your IRA, but
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| | Reimbursement Arrangements (HRA) and
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| you are still left with $44,153 after
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| | Health Savings Accounts (HSA). The first
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| taxes are paid. Your net gain for
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| | of these, Flexible Spending Accounts are
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| tax-deferred growth is just over
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| | also called section 125 plans or
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| $8500.Another individual plan is a Roth
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| | "cafeteria plans." This plan allows
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| IRA. It is somewhat similar to a
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| | participants to put pre-tax money into
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| traditional IRA but the difference is
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| | the account each year to cover health
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| that you cannot deduct the contributions
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| | insurance deductibles, co-payments,
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| and the earnings grow tax-free instead of
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| | dental care and other medical expenses.
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| tax-deferred. This type of plan is good
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| | Cafeteria plan money cannot accumulate
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| for someone with a longer timeframe to
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| | from year to year, however, so it needs
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| invest or those whose tax bracket in
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| | to be used up in one year or it will be
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| retirement will be close to or higher
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| | gone. The second type of medical savings
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| than their current tax rate. Tax-free
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| | account is a Health Reimbursement
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| growth means that you don't have to pay
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| | Arrangement. It is similar to an FSA but
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| taxes on any of the earnings in the
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| | the employer contributes to the account
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| account. If we start with $10,000 and
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| | instead of the employee.The employer can
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| invest it for 30 years at 6% growth like
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| | make contributions contingent on an
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| our example above, you would be left with
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| | employee participating in designated
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| $57,435. None of that money has to have
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| | health and wellness programs. In June
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| taxes paid on it since the initial
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| | 2002 it was updated to allow funds to
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| $10,000 already had taxes taken out and
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| | rollover from year to year, but it cannot
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| the earnings grew tax-free. Before you
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| | be rolled over from employer to employer
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| wonder why anyone would not automatically
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| | so if you change employers, you loose the
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| use a Roth IRA, consider the fact that
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| | accrued benefit. The last and most
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| the initial $10,000 investment wasn't tax
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| | recently created plan is a Health Savings
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| deductible like it was for the
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| | Account. This plan enables employees with
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| traditional IRA above. With a 28% tax
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| | high-deductible health insurance plans to
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| bracket, the Roth paid $2,800 on its
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| | set aside and invest money to use to pay
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| initial $10,000 investment. If we look at
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| | the deductibles or other healthcare costs
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| the growth potential of $2,800 for 30
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| | in the future.These plans are designed to
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| years in a tax-deferred account, it grows
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| | put healthcare decisions more into the
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| to $16,082. So, in this person's
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| | hands of the employees. These plans are
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| situation where their tax bracket is the
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| | also portable so they move with you when
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| same in retirement as it is while working
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| | you change employers and they can be
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| with a 6% rate of growth, a Roth wouldn't
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| | rolled over from year to year.Other
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| be the best option. The Roth would only
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| | AccountsFor those who are just looking to
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| grow to $57,435 - $16,082 = $41,353 when
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| | invest, a brokerage account is the medium
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| all taxes are taken into consideration
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| | to use. Brokerage accounts are setup
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| while the traditional IRA would grow to
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| | through investment companies to allow you
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| $44,153. There are several online
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| | to purchase securities such as stocks,
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| calculators that can estimate which type
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| | bonds, mutual funds, money markets,
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| of IRA would be to your advantage. Search
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| | options, etc. Generally the money sits in
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| under Roth vs. Traditional IRA for more
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| | a "core" account such as a money market
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| information and calculators to determine
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| | until you are ready to invest it in other
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| the best account for you.In addition to
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| | securities. There are fees for purchasing
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| individual plans there are also
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| | many securities which vary depending on
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| employer-sponsored plans. SEP IRA, SIMPLE
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| | the company that the account is setup
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| IRA and Keogh plans are in between
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| | with. Brokerage accounts can also offer
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| Traditional Individual Retirement
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| | check writing, debit and ATM cards for
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| Accounts and the standard employer
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| | easier access to money in the account.
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| sponsored plans such as 401(k)'s. SEP's,
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| | Since there are no tax-advantages of a
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| SIMPLE's and Keogh's are for self
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| | brokerage account, money can be withdrawn
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| employed individuals or small companies
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| | at any time from the core account. These
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| that need to put aside more money than a
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| | accounts are perfect for additional
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| standard IRA allows but aren't large
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| | savings that you want to invest in the
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| enough to warrant the expense of a 401(k)
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| | stock market.The standard savings account
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| plan. Each plan allows both employee and
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| | is probably what everyone is most
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| employer contributions. Each has set
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| | familiar with. Offered by any bank, a
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| maximums between $6,000 and $30,000,
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| | savings account allows you to set money
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| depending on the plan and the
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| | aside and receive a variable or fixed
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| contributor, and each has tax incentives
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| | interest rate depending upon the account.
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| for both the employer and the employee.
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| | Savings accounts are very liquid and can
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| These plans are great for small
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| | be withdrawn at any time, but they don't
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| businesses to be able to set aside money
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| | allow check writing capabilities. Most
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| for themselves and their employees and
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| | savings accounts now days do offer ATM
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| not have to go through the time and
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| | cards. Certificates of Deposit or CD's
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| expense of larger employer sponsored
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| | are types of savings accounts that
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| plans.The last type of retirement plans
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| | require money to be left in for a certain
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| are employer sponsored plans. When it
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| | period of time in exchange for a slightly
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| comes to retirement, it seems everyone
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| | higher interest rate, these accounts are
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| knows the term 401(k). This is because a
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| | less liquid and there is generally a fee
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| 401(k) is the retirement plan of choice
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| | to take the money out before the
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| for medium and large companies. In 2006,
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| | predetermined period of time.Whatever the
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| the maximum contribution to a 401(k) is
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| | reason or account used to set aside
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| $15,000. If you are over fifty and your
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| | money, it is always a good thing. Savings
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| employer offers the 401(k) "catch-up"
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| | in any form creates a more secure
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| contribution, you can contribute up to
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| | financial future and allows for problems
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| $5,000 more, so $20,000 total. Your
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| | or emergencies to be taken care of
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| employer may also contribute to your
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| | without having to obtain loans or dip
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| 401(k) plan which generally doesn't
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| | into less liquid savings such as a home
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| decrease your contribution allowance.
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| | or other physical assets. Opening up any
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| Originally, 401(k) plans were only
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| | of the above types of accounts gets you
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| offered to for-profit companies. Those
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| | started on the right track towards
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| who worked for non-profit companies such
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| | savings.Copyright 2006 Emma SnowEmma Snow
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| as charities, schools, universities and
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| | is a writer who specializes in financial
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| hospitals weren't able to contribute to
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| | planning. She has worked in the financial
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| 401(k) plans but were able to open 403(b)
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| | industry for over eight years.
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