Series 62

AAA

Retirement Plans - Introduction

For most people, saving for retirement has become an important investment objective for at least part of their portfolio. Investors may participate in retirement plans that have been established by their employers, as well as those they have established for themselves. Both corporate and individual plans may be qualified or non-qualified, and it is important for an investor to understand the difference before deciding to participate. Series 62 candidates can expect to see 5 to 10 questions on the exam dealing with retirement plans. The following table compares the key features of qualified and nonqualified plans.

Feature Qualified Non Qualified
Contributions Pre Tax After Tax
Growth Tax Deferred Tax Deferred
Participation must be allowed For everyone The corporation may choose who gets to participate
IRS Approval Required Not required
Withdrawals 100% taxed as ordinary income Growth in excess of cost base is taxes as ordinary income
Individual Plans
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