• Qualified retirement accounts help save money on taxes.saving box image by Franc Podgor...?ek from Fotolia.com
  
  The Internal Revenue Service recognizes a number of qualified retirement plans that are given special tax advantages to help individuals save for retirement. These plans vary regarding who is allowed to contribute, what tax benefits are granted and when withdrawals can be made. The contribution limits vary by plan type and are adjusted each year. For 2010, the contribution limit is up to $5,000 ($6,000 if you are 50 or older) total for traditional and Roth IRAs and $15,500 ($22,000 if you are 50 or older) total for 401ks and 403bs.
  
  

Traditional IRAs

• Traditional IRAs are individual retirement accounts that can be set up by anyone with earned income, regardless of whether or not your employer offers a retirement account. Traditional IRAs offer contributors the ability to claim a tax deduction for the contributions, and then the contributions grow tax-free until the money is withdrawn from the account at retirement. For IRAs, money can be withdrawn penalty-free after you reach age 59 1/2. When you turn age 70 1/2, you must start taking required minimum distributions from your traditional IRA. If you take distributions from your traditional IRA early, you must pay a 10 percent tax penalty unless you have an exception such as college tuition or medical expenses exceeding 7.5 percent of your adjusted gross income. Money in the IRA can be invested however you choose, with the exception of collectibles like paintings, jewelry or antiques.
  
  

Roth IRAs

• Roth IRAs are individual retirement accounts that have the same investment restrictions as traditional IRAs. However, only individuals whose modified adjusted gross income falls beneath the annual limits can make contributions. These limits vary based on filing status and are adjusted each year for inflation. Roth IRAs allow people to make after-tax contributions and then withdraw the money tax-free when you turn 59 1/2. In addition, you can withdraw contributions from your Roth IRA at any time, penalty-free. If you withdraw the earnings early, you will have to pay income taxes and penalties unless you have a qualified exception.
  
  

401k Plans

• Some companies offer 401k plans for their employees to contribute to in order to save for retirement. Traditional 401k plans offer the ability to make contributions with pretax dollars and then tax withdrawals at retirement. Roth 401ks take contributions made with after-tax dollars, and the withdrawals at retirement are not taxed. Unlike IRAs, employers can make contributions to 401k plans on behalf of their employees. Also, withdrawing money from a 401k plan is much harder, and some plans do not permit withdrawals at all. If you are able to take a withdrawal for a financial hardship, you must pay a 10 percent penalty regardless of the reason.
  
  

403b Plans

• 403b plans are very similar to 401k plans with one exception-they are only available for certain non-profit groups and educational institutions. A 403b plan is either a traditional 403b or a Roth 403b, which have the same tax implications as traditional 401k plans and Roth 401k plans, respectively.