Money Purchase Retirement Plan

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is a Money Purchase Plan?

A Money Purchase Plan is a type of retirement savings plan. In this plan, employers make fixed, mandatory contributions to individual accounts set up for each participating employee. The contribution amount is usually a percentage of each employee’s salary.

Money Purchase Pension Plan

Key Features

  1. Employer Contributions: Employers decide the contribution percentage.
  2. Fixed Contributions: The contribution rate is fixed and not based on company profits.
  3. Investment Risk: Employees bear the investment risks as account values fluctuate with the market.
  4. Retirement Benefits: Benefits depend on the accumulated balance at retirement.

Example

Imagine a company contributes 5% of an employee’s annual salary of $50,000 to their Money Purchase Plan. This means the employer will contribute $2,500 each year to the employee’s account.

What is a Money Purchase Pension Plan?

A Money Purchase Pension Plan is a type of Money Purchase Plan specifically designed as a pension scheme. It has similar characteristics, where employers make fixed contributions to an employee’s pension fund.

Differences from Standard Money Purchase Plans

  1. Pension Focus: Aimed specifically at retirement income.
  2. Regulation: Often subject to more stringent pension regulations.
  3. Tax Benefits: Provides tax benefits for both employers and employees.
Money Purchase Plan

Conclusion

Money Purchase Plans and Money Purchase Pension Plans are effective tools for retirement savings, with fixed employer contributions. They offer a straightforward approach to saving for retirement, although investment risks lie with the employee. Understanding these plans can significantly impact an individual’s retirement planning. Contact us today for a free quote.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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