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The Truth About Cutting Your Investment and Retirement Taxes: The Essential Truths in 20 Minutes by S. Kay Bell

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TRUTH 5Company retirement plans

Company retirement plans used to be primarily defined benefit plans. That meant that your employer set up the program and paid most of the costs. You got certain, or defined, amounts upon retiring from the company.

Now, however, most businesses offer “defined contribution plans.” As the name suggests, your eventual retirement amount relies more heavily on your personal contributions to the plan.

Your employer might match at least some of your contributions, but the other major component is the tax code, which enables you to defer taxes on your company retirement funds and reduce your income tax a bit in the process.

401(k) plans—The most common type of defined contribution plan is a 401(k), named for the section ...

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