Retirement Accounts Cheat Sheet

*This blog is educational in nature and is not making recommendations for your personal financial situation.

In the world of finance, there are so many terms that get thrown around. As someone who grew up in and still works in the industry, I’ve found myself expecting people around me to know what I’m talking about. There are two types of money. Non Qualified money and Qualified money. Qualified money receives special tax treatment from the IRS as it is designated to be used during your retirement years. I created a little cheat sheet to help you understand the types of retirement accounts and how they are taxed.

Tax Free is referring to the withdrawal phase of the account. When contributing to a Roth account, you pay tax on the money now so you don’t have to pay later when the account is hopefully much larger. A Tax Deferred account means you do not have to pay tax on the money now but you will have to down

Type of Account	Tax Free or Deferred	Details
Roth IRA	Tax Free	• Set up by the individual • Must make under a certain annual income (can change each year) • Contribution subject to limitations• Future withdrawals will be tax free
Roth 401K	Tax Free	• Employer sponsored • Individual contributions may be matched in part or full by employer • Funded with after tax money •Future withdrawals will be tax free •Contributions subject to limitations
IRA	Tax Deferred	• Set up by the individual • Must make under a certain annual income (can change each year) • Contribution subject to limitations • Future withdrawals will be taxable
401(k)	Tax Deferred	• Employer sponsored • Individual contributions may be matched in part or full by employer • Funded with after tax money •Future withdrawals will be taxable •Contributions subject to limitations
403(b)	Tax Deferred	• Employer sponsored • Individual contributions may be matched in part or full by employer • Funded with after tax money •Future withdrawals will be taxable •Contributions subject to limitations
SEP IRA	Tax Deferred	• Only available to employer or self-employed person • Individual contributions may be matched in part or full by employer • Funded with after tax money •Future withdrawals will be taxable •Contributions subject to limitations