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How do I know what type of retirement account I have?

Published

Knowing the type of retirement plan you currently have is an important first step in rolling that plan over to a qualified Betterment Traditional IRA or Roth IRA. The Roth versions of any of these plans will need to be rolled into a Betterment Roth IRA.

Various plan types:

  • 401(k): Standard pre-tax contributions made by the employee and often includes some matching by the employer.
  • Roth 401(k) or "Designated Roth Account": After-tax contributions made by the employee.
  • 403(b): Public schools, colleges, universities, charities, state governments, local governments and other tax-exempt entities under section 501(c)(3) of the IRS code are able to offer 403(b) plans.
  • 401(a): A 401(a) is similar to a 401(k) but are custom-designed plans often only offered to key employees of public sector institutions. They can be rolled into an IRA after separation from service.
  • 457: Public schools, colleges, universities, charities, state governments, local governments and other tax-exempt entities under section 501(c)(3) of the IRS code are able to offer 457 plans.
  • Thrift Savings Plan (TSP): TSP's are only offered by the federal government to government employees – this can include civilians and military personnel. Other than this plan being sponsored by the federal government rather than a private employer, the Thrift Savings Plan functions much like a 401(k).
  • Defined Benefit Plan or Pension: Contributions are calculated employee benefits using a formula. This formula will often include factors such as salary history and duration of employment. Employers have control over investments, risk, and investment portfolio features.
  • Defined Contribution Plan (401(k), 403(b) plans are also this type): These often have multiple investment options – stocks, mutual funds and other options may be available in these plans. Employees typically decide if they will contribute and how much of a contribution made from salary deductions.
  • Profit-sharing (Keogh): These plans are used by self-employed individuals. They can be rolled into an IRA if they are not being contributed to.
  • Money-purchase plan: These plans are set up by your employer. They can be rolled over to an IRA after separation from service, or according to the plan document.

Please note that Traditional (pre-tax) funds will need to be rolled over into a Traditional IRA, and Roth (post-tax) funds will need to be rolled over into a Roth IRA. If you're unsure if which kind(s) of funds your retirement plan has, please contact your current provider. You can also convert your Traditional IRA into a Roth IRA within Betterment if you wish to do so.

Learn how to roll over over a Traditional IRA, Roth IRA, Simple IRA, or SEP IRA.

As always, you should always consult a tax advisor and IRS Publication 590 to determine what type of IRA is right for you and how each type of rollover will impact your personal financial situation. As Betterment is not a tax advisor, we will not be able to provide tax advice.