Types of Retirement Plans

Episode Transcript

Speaker 1 (00:00):
And our telephone lines are open for you right now.
If you have questions for our retirement planning professionals from
Class Financial, I gotta just pick up phone dial in
six oh eight three two one thirteen ten. That's six
soh eight three two one thirteen ten. Gonna be talking
with CJ. Closs and Eric Schwartz this week. Bus are
different types of retirement plans as well as contribution limits.
But if you've got a question about anything related to retirement,

(00:23):
we'd love to have you join us this morning.

Speaker 2 (00:25):
Again.

Speaker 1 (00:25):
The telephone number to get on the air six oh
eight three two one thirteen ten. That's six oh eight
three two one thirteen ten. Of course, you can learn
more about Coss Financial on their website Coss financial dot com.
That's Coloss klaasfinancial dot com. Great website and resource to
learn about Coss Financial, their separate division you can learn
about the folks at Class Financial. You can also sign

(00:46):
up online for that weekly Market Pulse newsletter. It's a
nice weekly snapshot of what's going on in the markets.
You get it once a week, a little email in
your inbox. Again, that available to you at Cossfinancial dot com.
As mentioned joined this week by CJ. Claws and Eric Schwartz. CJ,
how you doing this morning.

Speaker 3 (01:03):
I'm doing great.

Speaker 4 (01:04):
How are you, Sean, I'm doing really well.

Speaker 2 (01:05):
Great to talk with you.

Speaker 5 (01:06):
Eric.

Speaker 2 (01:07):
Enjoying this, enjoying the sunny weather.

Speaker 5 (01:10):
I definitely am, Sean. It's a easier way to get
through the week.

Speaker 2 (01:14):
It is, and it's it's a great time of year.

Speaker 1 (01:17):
I know a lot of folks when we start getting
into spring and summer and you know, start getting a
little bit more active.

Speaker 2 (01:23):
Go goodness. I am really ready for.

Speaker 1 (01:24):
Retirement, and we've got we've got really as we talk
with Eric and CJ about retirement, we've got that great
program ahead for you. Speaking of other great things on
the program and all the great features. Not only we
get a chance to talk with Eric and CJ, we
also give you an opportunity to win a fantastic prize
from our friends at cows Financial. They've provided a twenty

(01:45):
five dollars gift card to Darden Restaurants Group. That's Olive Garden,
Longhorn Seasons fifty two, all those places you love to go.
That's that's what we're talking about with that gift card.
So little tip, if you listen closely to the program.
Oftentimes the question and answer to each week's Claws Quiz
question week comes up during the show, so it definitely

(02:06):
is beneficial to pay close attention for a number of
reasons to each week's program. And before we get rolling
on this week's topic and conversation, let's actually take a
look back at last week's show and get the question
and answer there as well.

Speaker 5 (02:19):
Yeah, so thank you to everybody for listening as always,
and congratulations to our winner from last week. That was
Ben from Wanta Key. Now, the question was, according to
Social Security, if you were born in or after nineteen sixty,
your full retirement age or your FRA is considered. What
age is it? Age sixty five or sixty seven? And

(02:41):
Ben knew the correct answer was sixty seven.

Speaker 2 (02:44):
Nice work, Ben, YouTube can be like Ben.

Speaker 1 (02:46):
Chance to win a little bit Later on in the program,
I got twenty five dollars gift card to dart In Restaurants.
As metcha were gonna be talking about different retirement plans
and contribution limits, and I know we as we discussed
these things, CEJ.

Speaker 2 (03:00):
There's a lot to know, isn't there.

Speaker 3 (03:03):
That's right, Yeah, And given that we're a retirement planning firm.
It's obviously no surprise that we specialize in helping individuals, families,
and employers optimize their retirement savings decisions. And this is
done through various different types of retirement accounts or retirement structures.
So let's start with a high level overview and then

(03:23):
we can dig into some of the nitty gritty as
we move along through the show. So to begin here,
in the United States, there are typically two core types
of retirement plans. The first type of retirement plan is
called a defined benefit plan, which is also often referred
to as a traditional pension plan, or or to merge
in both together, a traditional defined benefit pension plan. And

(03:48):
then the second type of retirement plan is often called
a defined contribution plan, which is also often referred to
by many different names such as four oh one K
four H three B, four to fifty, simple, IRA, IRA, ROTH, IRA,
and the list goes on. So I do want to
repeat that two core types of retirement plans you typically

(04:11):
see here in the United States defined a defined benefit
plan also known as a traditional defined benefit pension plan,
and a defined contribution plan also known as four to
one K, four H three B fourty seven simple IRA.

Speaker 4 (04:29):
So on and so forth.

Speaker 3 (04:30):
But what I want you to focus on is we
move forward throughout the show, is what is defined. In
the first one, what is defined is the benefit aka
what you will receive in the future. In the second one,
what is defined is the contribution. Also said another way,
you don't know what your benefit will be. You just
know how much is going into the account. Okay, So

(04:52):
everybody who's listening, keep that in your brain as we
move forward here. Now, the primary difference between these two
types of retirement plans is really who bears the risk.
And again what I mentioned is what is defined versus undefined.
So let's go through some questions and summarize them on
a per retirement plan type, beginning with the traditional defined

(05:15):
benefit pension plans.

Speaker 4 (05:17):
So here's a question.

Speaker 3 (05:18):
What's being promised in a traditional pension plan. Well, the
employer promises a specific retirement benefit to the employee based
on a formula that usually considers factors like salary history
and years of service. For those of you who are
listening who are a State of Wisconsin employees, your ears
should be perking up. Going this sounds an awful right,
A lot like my WRS employee trust funds pension. That's right,

(05:43):
your employee trust funds pension is, for the most part,
a defined benefit pension plan. So continuing through our questions,
in a pension plan, who bears the risk? And the
answer is the employer bears the investment risk. They are
responsible for ensuring there's an enough money to pay the
collective promises in current and future benefits to recipients regardless

(06:07):
of how the underlying investments perform. Next question is what
is defined? Well, we already talked about this. The benefit
the employee will receive that is defined. Next question, how
involved is the employee in kind of like operating this plan.
The answer is not much. Employees typically have little to
no say in how the assets are invested to meet

(06:28):
their future defined needs. Next question is the plan portable
and the answers. Benefits are often not easily portable if
an employee leaves the company before retirement, unless the employer
were to offer something called a lump sum pension payout
option that typically represents the present value of their future benefit. Otherwise,

(06:51):
if a lump sum option is not offered, former employees
will often have to wait to collect a benefit from
that former employer until a future date after they retire.
And then the final question is how is the account funded.
Employers are primarily responsible for funding the plan, although many
plans have a required employee contribution as well. Again for

(07:15):
our state of Wisconsin employees who are part of the
worstf pension system, you know quite well if you look
at your base dubs that the employer puts a contribution
in for you, but you also are required to put
in a contribution talking to So there you go, starting
with that one. That is the kind of some questions
and answers as it relates to the defined benefit pension point.

Speaker 2 (07:38):
Talk this morning with CJ.

Speaker 1 (07:39):
Closs and Eric Schwartz, our retirement planning professionals from Class
Financial talk about the defined contribution. In just a moment,
We've got a caller this morning. Terry joins us. Terry,
welcome to the programming. You're on the air with CJ.
Closs and Eric Schwartz of Class Financial.

Speaker 6 (07:53):
Good morning, Thank you. I am seventy five years old
and I have a revocable trust in which there's a
roth IRA that I just recently, with a review of it,
my trust with my attorney, decided to change the beneficiary
of the wroth from the that would go to the

(08:15):
trust to an individual, and I was warned about what
they call, I believe a look back period, and I'm
just wondering if you could talk a little bit about
that and tell me if should I it's something I
should be alarmed about that if this goes to my
requested beneficiary, that if I were to apply for Medicaid,

(08:40):
that it would be analyzed and he could perhaps have
to give back that money.

Speaker 3 (08:47):
M really good question. So I understand the premise of
your question, Terry, but I'm just for all of our listeners.
I'm going to kind of give the scope of your
question to make sure that everybody's on the same page,
and then I don't know that I'll be able to
answer your question, but I'll do my best. So what
Terry's getting at here is there's obviously he's asking some

(09:08):
questions about naming beneficiaries outright. So you can name individuals,
which has some benefits because then those individuals can use
required minimum distributions a little bit differently than say a
trust could, or you can list you can list those
same individuals through a trust, but sometimes those trusts, depending

(09:30):
upon if they have the right see through provisions or
not have different treatments around rmds. However, trusts also have
some asset protection or risk protection associated with them. The
second part of Terry's question here is around the Medicaid
spend down rules. We've done entire shows on this, but
it has to do with if I want to protect

(09:51):
my assets against Medicaid the required Medicaid spend down aka,
I go into a nursing home and I've got to
like spend all my own own money before Medicaid kicks in.
There's often a look back period associated with that. Now, Terry,
to get to your question, I'm not quite sure the
context of your question, because typically the look back period

(10:14):
would be with money that you gift outright to two individuals,
so there would be a typically a five year lookback
on that, or money that you put into an irrevocable
trust for purposes of.

Speaker 4 (10:28):
Avoiding the Medicaid spend down on that money.

Speaker 3 (10:32):
So those are typically the two ways that we see
that look back period come into play. You reference to
benefishery change, which to me, that money is not leaving
your estate yet, So I don't believe there's a look
back period when you're just changing beneficiaries. So I'm a
little confused by the context of the question, but at
least I've given you a high level of where these

(10:53):
topics come up. Now let me pause, Eric, are you
aware of anything else else?

Speaker 5 (10:59):
No, I was just thinking it feels like we're maybe
crossing topics here with gifting now versus at death right.

Speaker 3 (11:06):
Yeah, So, Terry, what I would encourage you if if
you know you still have questions, feel free to call
our office or call back your lawyer or your advisor
and talk to them about it. I think it's a
great question. I gess we might be crossing wires or
crossing topics.

Speaker 1 (11:19):
Terry, really good call, and thank you for taking time
to forget You two can be like Terry, if you
ever have questions, love to have you join us on
the show.

Speaker 2 (11:25):
We'll get you on the air with CJ. Closs and
Eric Schwartz.

Speaker 1 (11:27):
Of course, they are our retirement planning professionals from Class
Financial talking this week about various types of retirement plans,
also contribution limits, and just before Terry's call, we were
talking about defined benefit plans. Let's talk about defined contribution
retirement plans and kind of walk through those those same

(11:47):
points that we had with the with the benefit and
go over to the contribution side.

Speaker 3 (11:52):
Yeah, so we're gonna we're gonna go through the defined
contribution plans again. Those are the four one case four
or three b's four fifty seven simple erase things like that,
and we're going to go through those same questions. We're
going to ask some core questions around what's being promised,
who's bearing the risk, what is defined And you'll notice
that the answers changed now. Right, in the traditional defined

(12:13):
benefit pension plan system, you kind of get this sense
of like, well, my employer kind of takes care of
it all, and I just get a benefit in the future,
kind of like Social Security, Right, I just somebody just
magically takes care of it and I get income in
the future. Well, now we're going to talk about defined
contribution plans. So let's go through those same questions. First off,

(12:35):
what is being promised, Well, there is no guaranteed retirement
benefit amount, so we are not defining or guaranteeing or
promising the benefit amount. Instead, the employee and or employer
contribute a specific amount of money or percentage of a
salary to an individual account for the benefit of the
employee who bears the risk, Well, the employee bears the

(12:58):
investment risk. The amount that is available at retirement for
income purposes will depend upon the contributions made over the
years along with the performance of the investments chosen by
that individual, So the individual is choosing those investments. Next
questions what's being defined? Well, the contribution amount is defined,
not the future benefit. Next question how involved is the

(13:22):
employee in these plans? And the answer is employees most
commonly have a high degree of control over how their
investments are allocated within this this type of a plan,
and this of course impacts their risk and return profile
or risk and return potential for the future. Next question,
is the plan portable? The answer is these types of

(13:42):
defined contribution plans are typically portable. When an employee leaves,
they can typically take their vested account balance with them
through various distribution options, including a rollover to a new
employer defined contribution plan. And then final question, how is
the account funded? The answer is, these types of defined
contribution plans are typically funded by employee contributions and then

(14:05):
often by an employer matching contribution and or profit sharing contribution.
Now with these general questions and answers for these types
of defined benefit and define contribution retirement plans. In our minds,
it is important for our listeners to know that traditional
defined benefit pension plans have become significantly less common over

(14:28):
the years due to the complexity and cost of.

Speaker 4 (14:33):
Maintaining these plans.

Speaker 3 (14:34):
So again, what used to be known as traditional. By
the way, whenever you hear traditional in our industry, just
think the oldest version. So the oldest version used to
be that employers would have these pension plans. It was
very common, you know, fifty sixty, seventy years ago. Well,
because of the cost and complexity and the risk to
the employer, because again the risk is taking are the

(14:56):
employers taken on that risk, they have become significantly less common.
And beyond that, we Americans tend to like the feeling
of control, and therefore we often desire the portability and
flexibility of a defined contribution plan like a four to
one k or IRA, because we feel this, Hey, if

(15:16):
things go wrong, it's going to be on my merit
darn it right, it's not going to be on my
employer doing something wrong. So interestingly enough, Eric and.

Speaker 4 (15:23):
I really really appreciate.

Speaker 3 (15:26):
Traditional defined benefit pension plans, especially like the State of Wisconsin,
one of the best run in the country. Like whoop
whoop to the State of Wisconsin pension system. They have
just killed it in the way that they have both
funded and managed and invested the funds for that State
of Wisconsin pension. Unfortunately, the same cannot be said of
our neighbors to the south in Illinois for their pension plan.

(15:50):
But it doesn't matter. Pension plans can be great, but
we Americans love our freedom and our choice, and so
these four one ks and iras have become a lot
more popular over the years. So basically, pension plans are
still prevalent in some government and our union jobs or
state at state jobs. However, the private sector is now

(16:12):
dominated by defined contribution plans like four oh one ks
and four oh three p's really good overview.

Speaker 1 (16:17):
As we talked this morning with Cjloss and Eric Swartz,
they are our retirement planning professionals from COSS Financial. Hope
you've had a chance to check out the website. If not,
head on over their Coss Financial dot com. That's class
k l aas Financial dot Com TELF number six oh
eight four four two five six three seven. Don't forget
no charge for that initial gets to know you appointment
tech Loss Financial eight will be complimentary to you again

(16:38):
their number six oh eight four four two five six
three seven. So we talked about the various types of
retirement plans. We'll get into contribution limits. We will do
that next as Money in Motion with Coss Financial continues
right here on thirteen ten. Wib E talking this morning
with CJ. Closs and Eric Schwartz. They are our retirement
planning professionals from Coss Financial. Their website Coss Financial dot

(16:59):
com'ss k l aasfinancei dot com telphone number six O
eight four four two five six three seven. Talking this
week about different types of retirement plans and also contribution
limits and let's uh, let's let's talk about those contribution
limits this morning, and when it comes to uh limits,
when it comes to those defined contribution plans, things like

(17:21):
those four oh one k's and four h three b CJ.

Speaker 5 (17:26):
Actually, Sean, I think I'm going to take that chuck.

Speaker 2 (17:28):
Okay, Oh perfect, Eric, I've at it.

Speaker 5 (17:31):
CJ's been hogging the mic.

Speaker 3 (17:32):
I gotta get on here.

Speaker 5 (17:35):
So you know, if we think about this and we
use the same framework regarding the two most common types
of retirement plans that CJ was just talking about, it
actually makes a lot of sense. So if we start
with a traditional defined benefit pension plans which CJ just referenced,
are becoming more and more rare in the in the

(17:55):
private sector, largely because the employer is in charge of
fully funding that and they're making some pretty high level
promises for payments down the road. And if we think
back to how the employer is primarily responsible for the funding,
the investment decisions and all the risks associated with that,

(18:16):
it shouldn't be a big surprise that contribution limits for
these types of plans work very, very differently than for
defined contribution retirement plans, and differently in that we really
don't have contribution limits on the traditional defined benefit pension
plan side of things. Instead of that, they actually limit

(18:36):
the amount that the limit the amount of the benefit
that the employee can receive on the back end. Okay, so,
in a roundabout way, the benefit limitation does impact and
influenced the amount employers must contribute, but the irs doesn't
really say, well, you can only put x amount in
there per year. The core principle of a traditional defined

(18:56):
benefit pension plan is that there is a promise of
a specific retirement benefit. So that's usually expressed as a
monthly income amount, and it's typically calculated based on factors
like your salary history or yours of service, you know,
things like that. The the Internal Revenue Code does set
limits on the maximum annual benefit that can be paid

(19:18):
to a participant from a traditional defined benefit pension plan,
and in twenty twenty five, that limit is two hundred
and eighty thousand dollars. Okay, So, Sean, if you have
a really, really really generous pension plan in retirement, you're
gonna have to find a way to get by in
about twenty three thousand bucks a month. So I don't
know if that's if that's gonna work, but you know,
it is a pretty high limit.

Speaker 2 (19:39):
I don't know if I can swing that one air.

Speaker 5 (19:45):
There's a good I let's say there's also a limit
based on you know, employee comps. So the annual benefit
it generally can't exceed one hundred percent of the participant's
average compensation for their highest three consecutive calendar years. So
again we're not we're not limiting the amount going in
on the front end so much as we're looking at
at the back end and how much the employee can get. Now,

(20:08):
one other piece here the amount that the employer needs
to contribute to the plan each year. It's it's not
a fixed amount, so instead contributions are determined by someone
called an actuary who makes projections about future benefit payments
and investment returns, and they determine, based on those calculations
how much the employer actually needs to put in there

(20:30):
so that in the future, when when employees take benefits
from the plan, there are actually dollars there to make
those payments. So again, no limit on the front end,
mostly just limiting the amount that employees can receive in retirement.

Speaker 1 (20:45):
Talking this morning was Eric Schwartz, CG Class or Retirement
Plan Professionals from class financial website COLSS financial dot com.
That's Class K l A A S Financial dot com
and they're TELF number six So eight four four two
five six three seven. Eric, I know there's a lot
more to this, isn't there.

Speaker 5 (21:03):
Yes, there's a lot more to this, and ct I
think I might let you go into what that is.

Speaker 3 (21:10):
Yeah, yeah, So, as Eric just was saying, I mean again,
on the defined benefit pension plan side of things. The
limitation is on the back end in terms of the
amount that you can receive based on kind of different formulas,
the contributions that you put into it. Again, you're typically
not going to have access to those contributions is a
single lump sum value. So the IRS is less concerned

(21:31):
about that and not to mention because the employer is
the one making the contributions, there's less tax hit to
the government on not restricting contributions. So I know for
a lot of you are going, huh, well, employers have
a lot of ways of deducting income. Whether they're a

(21:51):
pastor entity or a sea corp, it doesn't really matter.
They typically have a lot of ways to reduce their
taxable income. Individuals, on the other hand, are pretty limited, right,
you don't have a lot of ways to reduce your
taxable income. There's retirement account contributions, itemized deductions, but you know,
maybe some depreciation on rental properties, but you're gonna have

(22:12):
to generally pay.

Speaker 4 (22:12):
Some income tax.

Speaker 3 (22:13):
And so that's why when we start shifting to talk
about defined contribution plans, that's where the clear limitations start
to kick in. So if we think back to how
the employee is primarily responsible for funding defined contribution plans
along with investment decisions and risk associated with it. It

(22:35):
should come as no surprise that contribution limits for these
plans are more defined. In a defined contribution plan like
four one K, four through B, traditional IRA, so on
and so forth, there are specific maximum contribution amounts and
limitations announced annually by the IRS. So here are some
of those twenty twenty five contribution limits for defined contribution

(22:56):
plans based upon the account type. And remember that many
of these figures are adjusted annually, so when I tell
it to you this year, by twenty twenty six, it'll
be a different number. So let's begin with four H
one K, four H three B and most four to.

Speaker 4 (23:11):
Fifty seven plans.

Speaker 3 (23:13):
The employee Elective Deferral limit aka the amount the employee
can contribute for anyone under the age of fifty is
twenty three thousand, five hundred dollars in the year twenty
twenty five. If you are over the age of fifty,
you are generally eligible for a catchup contribution of an
additional seven thousand, five hundred on top of the standard

(23:35):
twenty three thousand, five hundred. However, if you are specifically
age sixty, sixty one, sixty two, or sixty three, you're
eligible for an additional eleven thousand, five hundred dollars in
a catchup contribution instead of only that seventy five hundred
dollars catchup contribution. So again, twenty three thousand, five hundred

(23:57):
is the base. There's a catch up contribute for those
who are over fifty, and that catchup is seventy five
hundred dollars unless you're sixty, sixty one, sixty two, or
sixty three, and then the seventy five hundred dollars number
goes away and the number is actually eleven five. Are
you confused yet?

Speaker 2 (24:13):
A little bit? Go ahead as they talk with CJ.

Speaker 1 (24:18):
Class and Eric Schwartze Klass financ telephon umber six oh
eight four four two five six three sevens the telephone ever,
no charge.

Speaker 2 (24:25):
That initial gets to no you appointment at Class Financial.

Speaker 1 (24:27):
It will be confidential to you again that number six
oh eight four four to two five six three seven.
Picking up with with a little of that confusion, let's
let's let's move on to the next point there.

Speaker 4 (24:36):
CJ.

Speaker 3 (24:38):
Yeah, I mean, listen, everybody, people often say do you
really need a financial planner? And I go, no, It's
just I spend all day every day doing this and
I still have to look.

Speaker 4 (24:50):
Up the code to remember.

Speaker 3 (24:52):
So I mean, I mean, maybe I'm just not that smart,
and a lot of people can keep a lot more
stuff in their brain. But this stuff has complicated and
shifting every single year, and so there's a reason why
we exist to help people navigate all of this. But
with that being said, so saying all of this information
in a slightly different way, here are the maximum deferrals

(25:13):
you can make into your four one K, four h
through B and forty seven when including basic elective deferrals
and catch up contributions just as like a total annual amount.
So for those forty nine years forty nine years old
and younger, the max you can put in is twenty
three thousand, five hundred. For those age fifty or older

(25:36):
but not sixty, sixty one, sixty two, or sixty three,
the max you can put in is thirty one thousand.
For those who are specifically age sixty sixty one, sixty two,
or sixty three, the max you can put into these
types of plans is thirty five thousand, Now, all these
figures do not include the separate but combined total contribution

(25:58):
limits for any one employee after accounting for the employee
limitation in combination with the employer contribution which can be
added by the employer through a matching contribution or profit
sharing contribution.

Speaker 4 (26:11):
So on and so forth.

Speaker 3 (26:12):
Unfortunately, we just don't have enough time during the show
today to dig into what that limitation is. But what
you should know is what we just went through there.
Those numbers are just for the like employee elective deferrals,
what you put in out of your paycheck. There is
actually another limitation for but what if my employer wants
to put in profit sharing or matching dollars? Can they
put in you know, two hundred thousand like Eric was

(26:34):
talking about before. And the answer is no, there's a
total contribution limit there, But we just don't have time
to dig it.

Speaker 2 (26:41):
Talk this morning with CJ.

Speaker 1 (26:42):
Closs and Eric Schwartz, our retirement planning professionals from Class Financial.
Of course, the website colss financial dot com. That's Coss
Klaasfinanci dot com. They're teph number six oh eight four
four two five six three seven. No charge for that
initial get to know you appointment tech Loss Financial. It
will be complimentary to you again. Their numbers six eight
four four two five, six three seven. We'll take it

(27:03):
down the home stretch and get the Class quiz last week.
We'll do that next. As Money in Motion with Coss
Financial continues right here on thirteen ten, Wuiba talking this
morning with CJ. Class and Eric Schwartz, our retirement planning
professionals from Class Financial. They're telephone number six oh eight
four four two five, six three seven. No charge for
that initial get to know your appointment dech Loss Financial.
It will be complimentary to you again. They're number six

(27:25):
oh eight four four two five six three seven. And
as we're talking this week, CJ, you know, one of
the things I sometimes, because you guys do such a
great job laying this stuff out on a very high level,
I do think sometimes people think some of this stuff
is maybe a little a little simpler than it may
actually be. That we're talking very very nuanced, very you know,

(27:45):
pretty significant impacts making sure that things are done right.
And as we kind of take it down the home
stretch here, let's kind of wrap this up and talk
a little bit about some of the other other bullet
points that people really need to keep in mind here.

Speaker 2 (27:57):
CJ.

Speaker 4 (27:58):
Yeah, I know you're right, Sean.

Speaker 3 (27:59):
I mean, and it truth be told when you do
what we do and you communicate with people in many
different forms. Obviously we have this radio show, we meet
with people individually, and then we will do presentations to
large groups. I do get the sense of being it
being woefully inadequate for us to try to go through
these numbers on the error now. Now, maybe some of

(28:21):
you are at your desk right now writing down these numbers,
and if you are.

Speaker 4 (28:24):
God bless you, I'm so thankful that you have the
ability to do that. Others of you are on the
road right now going. Do you think expect me to
remember this stuff?

Speaker 3 (28:31):
And it's kind of the answer is no, no, I
expect you to kind of maybe retain a little bit
and up your IQ a little bit, but hopefully it
helps you.

Speaker 4 (28:39):
Seek good advice at some point.

Speaker 3 (28:41):
But let's just quickly go through a couple other types
of defined contribution retirement plans and the limitations associated with
those from a contribution standpoint. So again, let's talk about
simple irays in twenty twenty five, if you are under
fifty the maximum you can contribute as an employee to
your simple IRA plan is sixteen thousand, five hundred. If

(29:02):
you're fifty or older, as an employee, you can contribute
sixteen thousand, five hundred plus a ketchup contribution of another
thirty five hundred, bringing your total maximum contribution up to
twenty thousand. And then, similar to the four oh one
K and four h three B world, if you are
specifically aged sixty, sixty one, sixty two, or sixty three,
you can do that same sixteen thousand, five hundred, but

(29:23):
your catchup is larger, and that ketchup is five thousand,
two hundred and fifty, bringing your total maximum contribution up
to twenty one thousand, seven hundred and fifty.

Speaker 4 (29:33):
Once again, this.

Speaker 3 (29:34):
Is only the limit for the employee contribution and does
not include any total contribution limits when you add employee
and employer.

Speaker 4 (29:42):
We just don't have time for that today.

Speaker 3 (29:44):
And then finally moving on to the contribution limits for
traditional irays and wroth irays. Now remember these are typically
not sponsored by employers. These are typically like, I just
work somewhere that doesn't have a retirement plan, and I
I want to contribute to a retirement plan. But there's
no sponsoring by my employer.

Speaker 4 (30:04):
What do I do well?

Speaker 3 (30:05):
That's often where traditional iras and wroth iras come in.
So talking about contribution limits. If you're under fifty, the
maximum you can contribute to a traditional or wroth iras
seven thousand dollars in twenty twenty five. If you're fifty
or older, you can contribute seven thousand, plus a catch
up contribution of another one thousand, bringing your total maximum contribution.

Speaker 4 (30:26):
Up to eight thousand.

Speaker 3 (30:28):
However, here's the key. Your ability to deduct contributions made
into your traditional IRA may be limited by your modified
adjustic gross income in any calendar year. Furthermore, you may
not even be eligible to perform a roth IRA contribution
if you're modified adjust gross income is too high under
certain circumstances. So here's what I want everybody to understand.

(30:53):
Each of these types of defined contribution retirement plans has
their own limits and their own rules. You'll notice, in
like the simple IRA world and in the four to
one K four H three B world, we didn't really
talk about income limitations. You could be earning ten million
dollars a year and still max out a four oh
one k plan, there's no income limitations.

Speaker 4 (31:13):
But then when we.

Speaker 3 (31:13):
Talked about traditional iras and roth iras, I said, there
might be limitations if you earn too much or if
you're magized too high. And it's not even that you
can't contribute, you might just not be able to deduct.
It's it's again back to God bless you if you
can keep this all in your head. We barely can,
and we do this for a career. So I would
just encourage you if you're going to try to navigate

(31:35):
through define contribution to find benefit over multiple employers over
decades of a career, you can quickly get the sense
of why we have a job to help people navigate
all of this to make wise decisions that hopefully then
as you get to retirement, help you maximize the lifestyle
you're looking for.

Speaker 1 (31:53):
It's a really good day to start that conversation. You
can learn more at cossfinancial dot com. That's Coss Klaasfinancial
dot com or TELF number six O eight four four
two five six three seven. Don't forget no charge for
that initial get to know you appoyment tech loss Financial.
It will be complimentary to you again their number six
oh eight four four two five, six three seven. Want
to hold on to that telephone number because it's time
now for the coss quiz question of the week. It

(32:14):
works like this, in just a moment to ask you
the loss quiz question the week. You'll then have thirty
minutes from the today's program to call the class Financial
Office right here in Madison at six oh eight four
four two five, six three seven. If you are the
first cost correct answer, win this week's prize, which is
say twenty five dollars gift card to Darden Restaurants. This
week's loss quiz question the week? Is this true or false?
Traditional defined benefit pension plans have become significantly less common

(32:38):
due to complexity and cost. Telephone number six oh eight
four four two five six three seven, first cost correct
answer when that twenty five dollars gift card to Garden restaurants.
And now forguy as well, let's cost Financial Office right
here in Madison. C J. Eric, It's always great chatting
with you guys. You guys have a fantastic day. Thanks
Sean doctor, take care, Eric, Doctor Marty Greer join us
next year at thirteen ten wiby eight