27 Nov How can we invest in this retirement plan?

Q. I’ve read about QRPs – Qualified Retirement Plans – which are supposed to be better than an IRA. And that you can get a tax credit of $500 for investing. How can we apply?
— Trying to save

A. We think you’re a little confused.

Qualified retirement plans are generally plans offered by an employer, such as a 401(k) plan.

“Generally, yes, they are better [than IRAs] because they have larger limits than IRA plans,” said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton. “Currently IRA contributions are limited to $6,000 annually, or $7,000 if age 50 or older. 401(k) plans have a limit of $19,000, or $25,000 if over age 50.”

But the catch is that you can’t contribute to a 401(k) or similar plan unless your employer offers one – unless you’re self-employed.

If you have self-employed income, you can start your own retirement account, such as a SEP-IRA or SIMPLE plan. If you start up a plan, you may be eligible for the tax credits you mentioned. You can learn more about that here.

Your other option is to save in a traditional or Roth IRA. You can learn more about those plans here.

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This story was originally published on Nov. 27, 2019.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.