How Do Government-Regulated Retirement Plans Benefits Differ From Regular Savings Benefits?
Government-regulated retirement savings plans such as IRAs and 401(k)s are often called ‘qualified plans’ for short. The have a specific taxation scheme that’s not based on the investments you put into these ‘plans’. The taxation of your regular savings or investments depends on the nature (or type) of the investment itself. In this article, I compare these two in terms their taxation benefits. I’ll distinguish between qualified plan savings and regular investment savings by calling the former ‘QP-taxed savings’ and the latter ‘Investment-taxed saving’ By regular savings, here, refers to the money you’ve earned, been gifted, or inherited into and then invested by as in savings accounts, bonds, stocks, funds, or real estate. The taxation associated with these savings is dependent only on the type of investment and its earnings. QP-taxed savings rules: The defined-contribution qualified plans offered by your company like 401(k), 503(b) and your personal Individual Retirement Arrangement
