Traditional IRA -- Roth IRA -- SEP IRA -- SEP IRA for a self employed without employees -- SIMPLE IRA -- Solo 401(k) -- 401(k) Plan -- Safe Harbor 401(k) -- Age-Weighted Plan -- New Comparability Plan -- Super Comparability Plan -- Profit Sharing Plan
Traditional IRA
Annual contribution
- Individual Plan
- The annual contribution limit is $5,000 ($6,000 if 50 or older) for 2010 and 2011. Contributions to a Roth IRA and a traditional IRA in aggregate cannot exceed the annual limit.
- Contributions must be made by April 15 to be considered a prior-calendar-year contribution.
Tax deductions
The chart below shows the deduction limits for active participants in qualified plans for 2010.
| Filing Status | Modified Adjusted Gross Income for 2010 |
Under 50 Maximum Deductible Contribution for 2010 |
50 or Older Maximum Deductible Contribution for 2010 |
| $54,999 or less | $5,000 | $6,000 | |
| Single | $55,000-$64,999 | $200-$5,000 | $200-$6,000 |
| $65,000 + | None | None | |
| $88,999 or less | $88,999 or less | $6,000 per person | |
| Married (Filing Jointly) |
$89,000-$108,999 | $200-$5,000 | $200-$6,000 |
| $109,000 + | None | None |
Roth IRA
Annual Contributions
Contributions are made after tax, however you will pay no taxes when the funds are withdrawn at retirement.
- Individual Plan
- The annual contribution limit is $5,000 ($6,000 if 50 or older) for 2010 and 2011. Contributions to a Roth IRA and a traditional IRA in aggregate cannot exceed the annual limit.
- Contributions must be made by April 15 to be considered a prior-calendar-year contribution.
Opening and contributing to a Roth IRA is currently restricted to those with an adjusted income limit (AGI) of $122,000 (individuals) and $179,000 (couples). The maximum annual contribution to Roth IRA’s is generally $5,000 for savers under the age of 50 and $6,000 for savers over 50. The table below provides a summary of Roth IRA contribution/AGI income limits from the IRS.
2010.
| Filing Status | Modified Adjusted Gross Income for 2010 |
Under 50 Maximum Deductible Contribution for 2010 |
50 or Older Maximum Deductible Contribution for 2010 |
| $107,000 or less | $5,000 | $6,000 | |
| Single | $107,000-122,000 | $200-$5,000 | $200-$6,000 |
| $122,000 + | None | None | |
| $169,000 or less | $5,000 per person | $6,000 per person | |
| Married (Filing Jointly) | $169,000-179,000 | $200-$5,000 | $200-$6,000 |
| $179,000 + | None | None |
SEP IRA
Annual contributions
- Employer Sponsored Plan
- Contributions may be made by the employer only. Eligible employees may be restricted to those who are 21 or older, worked for their current employer during at least three of the preceding five years and earned at least $550 in 2009. Part-time employment counts in determining years of service.
- Employers contribute up to the lesser of 25% of an employee's eligible compensation or $49,000 in 2009. Compensation over $245,000 in 2009 is not considered eligible.
SEP IRA for a self employed business owner without employees
How much can be contributed to a SEP IRA is dependent on how you receive your compensation.
If you receive compensation as W-2 income
A S or C corporation, an incorporated partnership or a LLC who elect to be taxed as a corporation pays the business owner a W-2 salary. In this case, the annual SEP IRA contribution can be up to 25% of the owner's W-2 salary up to the SEP IRA $49,000 limit.
If you receive compensation as personal income
When a SEP IRA is established for a unincorporated business such as a sole proprietorship, unincorporated partnership or a LLC electing to be taxed as a sole proprietorship, annual contributions are made into your SEP IRA account between 0 to 20% of your net adjusted self employment income (or net adjusted business profits). SEP contributions are flexible and the percentage of contribution can be changed at any time and may be skipped in a bad year. SEP IRA contributions are generally 100% tax deductible from personal income.
Annual contributions
- Employer Sponsored Plan
- Employee and employer contribute.
- Employees can defer compensation up to 100% of their salary or $11,500 (14,000 if 50 or older) in 2010 and 2011.
- Employer must choose one of two options:
- Match employee's contribution dollar for dollar, up to 3% of compensation (not exceeding the deferral limit). In two years of any five year period, the match can be reduced to 1% of compensation.
- Contribute 2% of each eligible employee's compensation. Compensation over $245,000 in 2010 is not considered eligible.
Annual contributions
All contributions are discretionary. Compensation is earned income for self-employed individuals or unincorporated businesses.
- Employer Sponsored Plan
- Employees can defer up to the lesser of 100% of eligible compensation or $16,500 ($22,000 if 50 or older) in 2010 and 2011.
- The profit sharing contribution cannot exceed 25% of eligible compensation. Compensation over $245,000 in 2010 and 2011 is not considered eligible.
- Combined contributions (both salary deferrals and profit sharing) cannot exceed the lesser of 100% of compensation $49,000 in 2010 and 2011.
- Additional catch-up contributions of up to $5,500 in 2010 and 2011 are available for those 50 or older.
401(k) Plan
Annual contributions
- Employer Sponsored Plan
- Employees can defer up to the lesser of 100% of eligible compensation or $16,500 ($22,000 if 50 or older) in 2010 and 2011.
- Deferrals and employee contributions cannot exceed the lesser of 100% of each employee's compensation or $49,000 in 2010 and 2011. Total deductible contribution cannot exceed 25% of total eligible compensation. Catch-up deferrals are not included in this limit.
- Total deductible employer contributions to the plan cannot exceed 25% of total eligible compensation. Employer contributions do not include employee deferrals.
- Compensation over $245,000 in 2010 and 2011 is not considered eligible.
Annual contributions
A 401(k) safe harbor plan is a 401(k) plan that automatically satisfies the nondiscrimination rules for elective deferrals and matching contributions. For a 401(k) plan to be considered a safe harbor plan, employers must satisfy certain contribution, vesting, and notice requirements.
- Employer Sponsored Plan
- Employees can defer up to the lesser of 100% of eligible compensation or $16,500 ($22,000 if 50 or older) in 2010 and 2011.
- Deferrals and employee contributions cannot exceed the lesser of 100% of each employee's compensation or $49,000 in 2010 and 2011. Total deductible contribution cannot exceed 25% of total eligible payroll. Catch-up deferrals are not included in this limit.
- Total deductible employer contributions to the plan cannot exceed 25% of total eligible compensation. Employer contributions do not include employee deferrals.
- Compensation over $245,000 in 2010 and 2011 is not considered eligible.
Annual contributions
Age Weighted Profit Sharing Plans are profit sharing plans which allocate the contribution based upon age and income.
This plan is ideal for older workers. The allocation takes in consideration the time the employee has until normal retirement age and calculates the benefit needed to fund retirement. Younger workers have more time to accumulate monies and receive a smaller contribution. Older workers receive a larger contribution due to the shorter time prior to retirement.
- Employer Sponsored Plan
- Deferrals and employee contributions cannot exceed the lesser of 100% of each employee's compensation of $49,000 in 2010 and 2011. Total deductible contribution cannot exceed 25% of total eligible compensation.
- Compensation over $245,000 in 2010 and 2011 is not considered eligible.
Annual contributions
A New Comparability Plan divides participants into groups, with each group receiving a contribution that is a different percentage of compensation. The simplest type of grouping is to have the owners in one group and all other employees in another group. Some employers have several groups such as owners over age 40, owners under age 40, clerical staff, etc.
- Employer Sponsored Plan
- Deferrals and employee contributions cannot exceed the lesser of 100% of each employee's compensation or $49,000 in 2010 and 2011. Total deductible contribution cannot exceed 25% of total eligible compensation.
- Compensation over $245,000 in 2010 and 2011 is not considered eligible.
Annual contributions
This plan incorporates the features of a new comparability profit sharing plan with 401(k) safe harbor provisions.
- Employer Sponsored Plan
- Employees can defer up to the lesser of 100% of eligible compensation or $16,500 ($22,000 if 50 or older) in 2010 and 2011.
- Deferrals and employee contributions cannot exceed the lesser of 100% of each employee's compensation or $49,000 in 2010 and 2011.Total deductible contribution cannot exceed 25% of total eligible compensation. Catch-up deferrals are not included in this limit.
- Total deductible employer contributions to the plan cannot exceed 25% of total eligible payroll. Employer contributions do not include employee deferrals.
- Compensation over $245,000 in 2010 and 2011 is not considered eligible.
Annual contributions
- Employer Sponsored Plan
- The employer contributes up to the lesser of 100% of eligible compensation or $49,000 in 2010 and 2011. Total employer contribution cannot exceed 25% of total eligible payroll.
- Compensation over $245,000 in 2010 and 2011 is not considered eligible.
Consult your CPA to determine which retirement plan would be most effective for you or your business.
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