Updated June 2006

Over the past 125 years, retirement has become a common social phenomenon, and the combined efforts of industry, individual savers, and the Congress have led to a wide and sometimes confusing array of retirement savings vehicles. This Congressional Budget Office guide focuses on retirement plans that are treated more favorably under the current income tax regime than are other forms of saving. It addresses retirement plans offered by employers and unions, as well as those that involve personal saving. The guide's purpose is threefold: to explain the different tax incentives associated with various plans; to discuss what the government requires of such plans as a condition of their tax-favored status; and to describe how employers and individuals have adapted in response to tax incentives and the accompanying requirements.

Companion documents, titled Utilization of Tax Incentives for Retirement Saving and Utilization of Tax Incentives for Retirement Saving: An Update, profile participation in retirement plans in 1997 and 2000, respectively, employing data from tax information returns. Those reports break down rates of participation and average contributions by age group, income class, and marital status/earner role, discussing the patterns that emerge and their implications for public policy. For readers interested in Social Security, the CBO publication Social Security: A Primer, issued in September 2001, is available.

DISCLAIMER: This guide reviews most retirement savings programs that have associated tax incentives. It is intended to inform discussions of policy, not to provide legal or tax advice to readers in the process of or contemplating making personal or business decisions about retirement savings plans. Tax laws and regulations change frequently, and the guide may not contain all of the information needed to address individual situations. Readers seeking advice on retirement saving should consult an attorney or other tax professional.

How to Use the Guide

You can use this online guide in different ways. For a broad overview of the subject, begin with the jumping-off points on this page and follow them to subsequent pages, as your interests dictate. Each page covers a discrete topic. For example, the characteristics of traditional individual retirement accounts (IRAs), Roth IRAs, 401(k) plans, and 403(b) plans are summarized on a separate page, as are the various requirements (for example, rules governing nondiscrimination and vesting) that programs must meet to qualify for tax incentives. Use the links on those pages (which appear in bold red type) to navigate between types of plans and the requirements to which they are subject, and vice versa. You will also find links to other relevant topics, such as conversions to cash balance plans or the historical development of IRAs.

Alternatively, for quick information about a single topic, go to the index or to the topical outline. The index lists each topical page in alphabetical order. The topical outline organizes the pages by subject. From either place, you can go directly to the topic that interests you.

To see a brief definition of an unfamiliar term or abbreviation, just place the cursor over the term, and the definition will appear in a second or two in a red box at the top of the screen. Definitions are available for all terms that appear in bold blue italic type. Links in the text that also have definitions are in bold red italic type.

To view footnotes, click on the footnote number and the text will appear at the bottom of the page. Whenever possible, the sources listed for an entry include hyperlinks so that you can access the sources directly.

To get started, choose from among the following:

• Employment-Based Retirement Plans
  
  
• Individual Retirement Accounts
  
  
• Other Tax Incentives for Personal Saving
  
  
• Topical Outline
  
  
• Index