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often enables a much larger total contribution than other plans would permit.
For example, as an employee, you can contribute as much as $17,500 and as the
employer, you can contribute an additional 25 percent of compensation for a
total employee/employer contribution maximum of $49,000. If you and your
spouse both work at the company and participate in the plan, you can save a total
of $98,000. For those 50 or older and eligible for catch-up contributions, that
figure climbs to a whopping $109,000.
Profit Sharing (or Keogh):
These plans allow employers to contribute a
percentage of employee compensation to the plan.However, the same percentage
used by the owner must be used for employees. For example, an owner who wants
to make a company contribution of 10 percent of his salary to his own retirement
plan must also contribute 10 percent of each participant’s salary to the plan.
Defined Benefit:
These pension plans pay a fixed amount when participants
retire, regardless of how well (or poorly) the plan has performed.
Which of the above plans is right for you will depend on your individual
circumstances (see table, p. 56 for a detailed breakdown of plan types, including
contribution limits and advantages of each).
In Focus: RetIRement
Some experts recommend
a stock allocation of roughly
120 minus your age.
Continued from page 54