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When it comes to planning for retirement, having access to a workplace retirement plan is essential for many employees. While most people may be familiar with popular options like 401(k) plans, there are some lesser-known retirement plans that offer great benefits and advantages. In this article, we will explore two such retirement plans that are not widely known but provide significant advantages to employees.

1. 457(b) Plan:
A 457(b) plan is a retirement plan designed specifically for employees of state and local governments, as well as certain tax-exempt organizations. This plan allows employees to contribute a portion of their pre-tax income to their retirement fund, similar to a 401(k) plan.

One of the significant advantages of a 457(b) plan is that it has a higher contribution limit compared to a 401(k) plan. In 2021, employees can contribute up to $19,500 to their 457(b) plan, with an additional catch-up contribution of $6,500 for individuals aged 50 and above. This higher contribution limit allows employees to save more for retirement, potentially leading to a more secure financial future.

Moreover, a 457(b) plan also has a unique provision known as the “double catch-up” provision. This provision allows employees within three years of reaching their plan’s normal retirement age to contribute twice the annual limit for the final three years leading up to retirement. This benefit is particularly advantageous for individuals who started saving for retirement later in their careers or experienced gaps in their savings.

Unlike other retirement plans, there is no early withdrawal penalty for funds withdrawn from a 457(b) plan before the age of 59½. However, the withdrawals are still subject to income tax. This flexibility can be beneficial for employees who may need to access their retirement savings in case of a financial emergency or unexpected circumstances.

2. Simple IRA Plan:
The Simple IRA (Savings Incentive Match Plan for Employees) is another lesser-known workplace retirement plan that offers excellent benefits for both employers and employees. This plan is primarily aimed at small businesses with fewer than 100 employees.

The Simple IRA plan provides a straightforward way for employers to contribute to their employees’ retirement savings while also benefiting from tax advantages. Employers can choose to match their employees’ contributions dollar-for-dollar, up to 3% of their compensation, or make a non-elective contribution of 2% of employees’ compensation, regardless of whether they contribute.

One of the distinguishing features of a Simple IRA plan is the ease of administration. Employers are not required to file annual reports with the IRS, reducing administrative burdens and costs. Additionally, employees have the flexibility to choose where to invest their contributions from a range of investment options, including stocks, bonds, and mutual funds.

Contributions to a Simple IRA plan are tax-deductible, similar to other retirement plans, allowing employees to reduce their taxable income. Furthermore, employees can contribute up to $13,500 in 2021, with an additional catch-up contribution of $3,000 for individuals aged 50 and above.

In conclusion, while popular retirement plans like 401(k)s have gained significant recognition, it is essential to explore less-known options that offer unique advantages to employees. The 457(b) plan and Simple IRA plan are two such workplace retirement plans that provide excellent benefits for individuals looking to secure their financial future. Whether you are a government employee or work for a small business, consider exploring these lesser-known retirement plans to maximize your retirement savings and enjoy the numerous advantages they offer.