Contribution Limits

• Contribution rules are rules governing the amount of money you may contribute to a retirement account. For example, a 401k plan held with an employer only allows you to contribute a maximum of $16,500 per year if you are under age 50. Over 50, you are allowed to contribute $22,000. Individual Retirement Accounts allow contribution limits of $5,000 and $6,000, respectively. A Savings Incentive Match Plan for Employees, or SIMPLE, IRA allows a maximum contribution of $11,500 and $14,000, respectively. A Simplified Employee Pension, or SEP, allows maximum contributions of $49,000 per year.
  
  

Investment Option Rules

• Your retirement plan must abide by investment option rules set forth by law. Many retirement plans allow a variety of investment options. However, there are some general restrictions for many plans. Life insurance policies are prohibited in IRA accounts, for example. However, 412i pension plans must invest in life insurance and annuity policies. These restrictions affect how you or your employer may allocate investment dollars and may affect your ultimate outcome at retirement.
  
  

Withdrawal Rules

• Some retirement plans mandate withdrawals at a certain age. You must take withdrawals from IRAs, for example, when you reach age 70 1/2. This rule also applies to 401k plans, SIMPLE, SEP, and Roth 401k plans. The penalty for not taking the mandatory withdrawal is a 50 percent penalty assessed on the amount of money that should have been withdrawn but was not. You must take withdrawals according to your life expectancy listed in table III of the appendix in IRS publication 590.
  
  

Nondiscrimination

• Employers must follow nondiscrimination rules for retirement plans they set up. These rules apply to all plans, including SEP and SIMPLE IRAs as well as 401k plans. Employers much offer the same plan to all eligible employees and any contributions made to an employee's account must be made for all employees. For example, if an employer offers a 50-cent contribution for every dollar the employee contributes to his retirement account, all employees must be offered the same 50 cents per dollar contributed.
  
  

Nonvoluntary Payments

• Some retirement plans offer payments that have limited or no payment options. Examples of this would be pensions and Social Security. Pensions are funded by employers and offer a defined benefit payment. An example of this would be a 412i plan. Pensions offer payments to employees after a certain age, normally 59 1/2. Employees may choose between lifetime payments, a reduced payment and a beneficiary payment to the spouse, or a lump sum payment in lieu of lifetime payments. Social Security benefits are offered beginning at age 62, but these payments are reduced to reflect early retirement. Normal retirement age depends on when you were born, but the benefit payment is increased over the early retirement age. There is also a delayed or late retirement age and associated benefit payment which is dependent on when you were born as well. A one-time death benefit payment of $225 is made to a beneficiary when you die. Your spouse or child may also receive a beneficiary payment depending on their age.