Question

1. An employer earning $160,000 is considering establishing multiple retirement plans for his organization so he can save more for retirement. Which combination would allow for the largest contribution?

1. 401(k) plan and SIMPLE 401(k) plan
2. Private 457(b) plan and 403(b) plan
3. SIMPLE IRA plan and SEP IRA plan
4. 401(k) plan and 403(b) plan

Answer 1

Assuming it is a private organization

403 (b) plan will not be applicable, as it is allowed only for public education organizations, some non-profit employers (only Internal Revenue Code 501(c organizations), cooperative hospital service organizations, and self-employed ministers in the United States. Therefore answer B and D are ruled out

The best combination would be A) 401(k) and simple 401 (k)

Simple 401 (k)

However, SIMPLE 401(k) plans are not subject to annual nondiscrimination testing. Contributions are immediately 100 percent vested, which means that an employee who meets the requirements to receive distributions from the plan may withdraw their entire account balance at any time. Also, the annual contribution limits are lower for a SIMPLE 401(k) plan than for a traditional 401(k) plan.

401 (K)

Advantages of the 401k plan include: Tax Deferred. All savings for retirement in this plan are tax deferred. This means the contribution is taken out before taxes are paid on your paycheck. Taxes will be paid on the amount withdrawn, however. You have a choice.