TABLE: Stashing Away More Retirement Cash
If you've made the maximum contribution to your 401(k) plan and want to do
more, here are your options:
NAME DESCRIPTION ADVANTAGES DISADVANTAGES
AFTERTAX Works like the Tax-deferred buildup May not be an
401(k) regular 401(k), of investment income, attractive alter-
except contribu- just like the regular native if the plan
tions come out 401(k). doesn't have de-
of aftertax in- sirable investment
come, with limits options.
AFTERTAX While the tax- Tax-deferred buildup Restrictions on
INDIVIDUAL deductible IRA of investment income. early withdrawal.
RETIREMENT is off-limits to Investor is not lim- When money is with-
ACCOUNT most people who ited to the 401(k) drawn, earnings are
have a pension plan's choices. taxed as income
plan, individ- even if they are
uals can still capital gains.
put up to $2,000 Extra investor must
a year ($2,250 keep track of nonde
for a couple) of -ductible contrib-
aftertax money utions.
into an IRA.
VARIABLE A mutual fund Tax-deferred buildup Fees can be high.
ANNUITY tucked inside an of investment Insurance charges
annuity "wrap- income. No limit on can add 1.25% more
per," often a amount of aftertax in expenses every
joint offering dollars that go into every year. Most
of an insurance plan. Investments variable annuities
company and a may be made at any have declining
mutual-fund time and in varying surrender charges.
company. amounts. Investor Restrictions on
is not limited to the early withdrawals.
funds in the 401(k)
DATA: BUSINESS WEEK