--- title: Qualified Retirement Plan | How It Works, Investing, & Taxes description: When it comes to saving for retirement, there are a lot of options out there. One popular option is a qualified retirement plan. But what exactly is a qualified retirement plan? image: https://www.carboncollectiveinvesting.com/hubfs/Qualified_Retirement_Plan.png --- [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo-white.4f6047d4.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo.53b28bee.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) **[Home](https://www.carboncollectiveinvesting.com/) > [Sustainable Investing](https://www.carboncollectiveinvesting.com/sustainable-investing) >** Qualified Retirement Plan # Qualified Retirement Plan ![](https://www.carboncollectiveinvesting.com/hubfs/Brooke%20Tomasetti.png) Written by Brooke Tomasetti | Reviewed by [Subject Matter Experts](https://www.carboncollectiveinvesting.com/subject-matter-experts) Updated on October 1, 2024 Fact Checked Why Trust Carbon Collective? ### Table of Contents A qualified retirement plan is a specific type of retirement account that offers tax advantages and other benefits. According to the IRS, "A qualified plan must satisfy the Internal Revenue Code in both form and operation."  This means that qualified retirement plans must meet specific requirements that are outlined in the [Employee Retirement Income Security Act (ERISA)](https://www.dol.gov/general/topic/retirement/erisa). Qualified plans must comply with ERISA's reporting, disclosure, and fiduciary requirements. A qualified plan is funded through an employer. The most common types of qualified retirement plans are 401(k)s and pensions, but there are many others to choose from as well. They offer participants different investment options designed to help people save for retirement. Generally, contributions to a qualified retirement plan are deductible from your income taxes, and earnings on the investments in the account are also tax-deferred until you withdraw them. ## Types of Qualified Retirement Plan There are many qualified retirement plan types, including: ![Types_of_Qualified_Retirement_Plan](https://www.carboncollectiveinvesting.com/hs-fs/hubfs/Types_of_Qualified_Retirement_Plan.png?width=1920&name=Types_of_Qualified_Retirement_Plan.png) - [401(k) plans](https://401k.carboncollective.co/employer-401k?_ga=2.15713974.1828315437.1656463577-1796082814.1656463577) A 401(k) is a qualified retirement plan that allows employees to contribute pre-tax income to the account. The contributions are not taxed until they are withdrawn, and participants can choose from various investment options. - 403(b) plans A 403(b) plan is a qualified retirement plan that allows employees of public schools and tax-exempt organizations to invest in their retirement. It’s similar to a 401(k), but participants must contribute to the account through payroll deductions. It is a qualified retirement plan for employees of public schools and other not-for-profit organizations. Similar to 401(k)s, contributions are made pre-tax, and earnings grow tax-deferred. - Pension plans A pension plan is a qualified retirement plan that pays periodic income payments after you retire. It’s usually offered by employers, and the contributions are not taxed until they are withdrawn. - Money purchase pension plans A money purchase pension plan is a qualified retirement plan in which participants contribute to the account on a regular basis. The contributions are not taxed until they are withdrawn, and the investments in the account grow tax-deferred. - Cash balance pension plans A cash balance pension plan is a qualified retirement plan that allows employees to contribute pre-tax income to the account. The contributions are not taxed until their withdrawal, and participants can choose from various investment options. - Profit-sharing plans A profit-sharing plan is a qualified retirement plan in which employees regularly contribute to the account. The contributions are not taxed until their withdrawal, and the investments in the account grow tax-deferred. - Stock bonus plans A stock bonus plan allows employees to own company stock, which can be a valuable asset in retirement. Contributions to this plan are discretionary but must be substantial and recurring. This means that employers are not required to contribute to the account, but if they do, the contributions must be significant and occur on a regular basis. - SIMPLE IRA plans A SIMPLE IRA plan is a qualified retirement plan for businesses with 100 or fewer employees. Employees can contribute to the account on a pre-tax or Roth basis, and the investments grow tax-deferred. - SEP IRA plans A SEP IRA plan is a qualified retirement plan for self-employed individuals and businesses of any size. Contributions are made on a pre-tax basis, and earnings grow tax-deferred. - Keogh plans A Keogh plan is a qualified retirement plan that allows self-employed individuals to contribute pre-tax income to the account. The contributions are not taxed until they are withdrawn, and participants can choose from various investment options. - 403(b) Roth plans A 403(b) Roth plan is a qualified retirement plan that allows employees of public schools and tax-exempt organizations to invest for their retirement. It’s similar to a 403(b), but contributions occur on an after-tax basis, and earnings grow tax-free. - Employee Stock Ownership Plans (ESOPs) An ESOP is a qualified retirement plan that allows employees to contribute pre-tax income to the account. The contributions are not taxed until they are withdrawn, and participants can choose from a variety of investment options. ## How Does a Qualified Retirement Plan Work? [Qualified retirement plans](https://learn.financestrategists.com/finance-terms/qualified-retirement-plans/) allow employees to invest a portion of their income in the plan on a pre-tax basis. This reduces their taxable income, which can result in significant savings over time. Employers may also contribute to qualified plans on behalf of their employees. The amount depends on the type of qualified plan and other factors, such as income and eligibility requirements. For example, a company may match contributions to a certain percentage or dollar amount each year if you enroll in its qualified retirement plan. You may also contribute more than your employer if you are eligible to do so, or vice versa. The most common qualified retirement plan is a 401(k). Employees can make contributions on a pre-tax basis into these accounts, which allows them to save money for the future while reducing their taxable income in the present day. Qualified plans also offer employees different investment options. This allows them to choose the investments that best fit their individual needs and goals. Employers often match employee contributions, which can help you save more for retirement. Contributions are typically made on a pre-tax basis, which reduces your taxable income in the present day. You can also choose your investments, which gives you more control over your future. ## Qualified Retirement Plan and Investing When it comes to investing, there are different options available within qualified retirement plans. Employees can choose to invest in stocks, bonds, mutual funds, and other securities. This allows them to build a diversified portfolio to suit their needs and goals. Additionally, qualified retirement plans allow employees to invest in employer stock. This can be a great way to save for retirement and invest in the company’s future. ## Qualified Retirement Plan and Taxes One of the benefits of qualified retirement plans is that they allow employees to save for the future while reducing their taxable income in the present day. This can result in significant savings, which is why qualified plans are so popular. For example, a company may match contributions to a certain percentage or dollar amount each year if you enroll in its qualified retirement plan. You may also contribute more than your employer if you are eligible to do so, or vice versa. Qualified plans also offer employees different investment options. This allows them to choose the investments that best fit their individual needs and goals. Employers often match employee contributions, which can help them save even more for retirement. Contributions are typically made on a pre-tax basis, which reduces your taxable income in the present day. You can also choose your own investments, which gives you more control over your future. ## Qualified and Non-Qualified Retirement Plans: What is the Difference? A qualified plan is a retirement plan that meets requirements set forth by the IRS and other regulatory agencies. These plans include 401(k) and 403(b) plans. Non-qualified retirement plans are not subject to the same requirements as qualified plans and typically offer employees fewer investment options. They also do not provide the same tax benefits as qualified plans. For this reason, it is crucial to understand the differences between qualified and non-qualified retirement plans before choosing one for your needs. ### Types of Non-Qualified Retirement Plans: Individual-sponsored: - Traditional IRAs - Roth IRAs - Self-directed IRAs Employer-sponsored: - 457 plans - Executive bonus plans - Deferred compensation plans ## The Bottom Line Qualified retirement plans offer employees numerous benefits, including the ability to save for the future while reducing their taxable income in the present day. Employees can choose from a variety of investment options, and many employers match contributions. These plans are a great way to secure your financial future. If you’re looking for a qualified retirement plan, be sure to research your options and compare different plans before making a decision. There are numerous great plans available, and each one has unique benefits. Be sure to also consult with an accountant or financial advisor to make sure you’re making the most advantageous choices for your particular situation. ## FAQs ### 1. What is the minimum age for a qualified retirement plan? The minimum age for a qualified retirement plan depends on the type of plan. For 401(k)s, the minimum age is 21. For 403(b) plans, the minimum age is 18. ### 2. What is the maximum age for a qualified retirement plan? There is no specific maximum age for qualified retirement plans. However, employees must begin taking required minimum distributions by April of the year following the year in which they turn 73. ### 3. What is the minimum service requirement for a qualified retirement plan? The IRS requires the employee to complete one year of service before they are eligible to participate in a qualified retirement plan. ### 4. How much can I contribute to a qualified retirement plan? The amount you can contribute to a qualified retirement plan depends on the type of plan and your income level. For 401(k)s and 403(b), the maximum employee contribution is $22,500 in 2023. Whereas, the maximum combined contribution for employer and employee is $66,000. ### 5. How much can my employer contribute to a qualified retirement plan? The amount your employer can contribute to a qualified retirement plan depends on the type of plan and your income level. For 401(k)s and 403(b), the maximum combined contribution for employer and employee is $66,000. ### Related Topics - [Sustainable 401(k) Plan](https://www.carboncollective.co/401k) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing/) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Retirement Glossary](https://www.carboncollective.co/sustainable-investing/retirement-planning-glossary) - [Best Retirement Plans](https://www.carboncollective.co/sustainable-investing/the-10-best-retirement-plans) - [Wealth Manager Vs Financial Advisor](https://www.carboncollective.co/sustainable-investing/wealth-manager-vs.-financial-advisor) ![Attend Our Next Webinar](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-webinar.12af7b6e.svg) ### Attend Our Next Webinar Join our next Sustainable Investing 101 webinar, get our favorite DIY options, and walk through how we build our portfolios. [Watch Now](https://www.carboncollective.co/sustainable-investing-webinar-green-retirement-month) ![Get Our Newsletter](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-demo.6ed28722.svg) ### Get Our Newsletter Go a level deeper with us and investigate the potential impacts of climate change on investments like your retirement account. Join Newsletter ![close-typeform](data:image/gif;base64,R0lGODlhEQARAIAAAODn7P///yH5BAEHAAEALAAAAAARABEAAAIqBIKpab3v3EMyVHWtWZluf0za0XFNKDJfCq5i5JpomdUxqKLQVmInqyoAADs=) ![Talk To A Human](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-chat.49d48c5b.svg) ### Talk To A Human Joining a new investment service can be intimidating. We’re here for you. Click below to email us a question or book a quick call. [Ask a Question](https://ask.carboncollective.co/f70pooobq) Topics ## Sustainable Investing Topics View our list of some topics below. See More - Portfolios - [Performance](https://www.carboncollectiveinvesting.com/returns) - About - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - Learn - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - Contact - [Contact us](mailto:hello@carboncollective.co) - [Legal](https://www.carboncollective.co/legal) - [Privacy Policy](https://www.carboncollectiveinvesting.com/hubfs/2022-11%20Carbon%20Collective%20Privacy%20Policy.pdf) - [Back to top](https://www.carboncollectiveinvesting.com/sustainable-investing/qualified-retirement-plan#top-of-page) DISCLAIMERS: Advisory services provided by Carbon Collective Investment LLC (“Carbon Collective"), an SEC-registered investment adviser. A copy of Carbon Collective's current written disclosure statement discussing Carbon Collective’s business operations, services, and fees is available at the SEC’s investment adviser public information website – [www.adviserinfo.sec.gov](https://adviserinfo.sec.gov/firm/summary/310129) or [our legal documents here](https://blog.carboncollective.co/legal-documents/). The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. Carbon Collective does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Carbon Collective’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Investments in securities: Not FDIC Insured • No Bank Guarantee • May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and Carbon Collective's charges and expenses. Carbon Collective's internet-based advisory services are designed to assist clients in achieving discrete financial goals. They are not intended to provide comprehensive tax advice or financial planning with respect to every aspect of a client's financial situation and do not incorporate specific investments that clients hold elsewhere. For more details, see our Form CRS, Form ADV Part 2 and other disclosures. Past performance does not guarantee future results, and the likelihood of investment outcomes are hypothetical in nature. Not an offer, solicitation of an offer, or advice to buy or sell securities in jurisdictions where Carbon Collective is not registered. © 2026 Carbon Collective Corporation. All rights reserved. × #### Fact Checked Carbon Collective partners with financial and climate experts to ensure the accuracy of our content. Our team of reviewers are established professionals with years of experience in areas of personal finance and climate. They have contributed to top tier financial publications, such as Reuters, Axios, Ag Funder News, Bloomberg, Marketwatch, Yahoo! Finance, and many others. This team of experts helps Carbon Collective maintain the highest level of accuracy and professionalism possible. × #### Why Trust Carbon Collective Carbon Collective is the first online investment advisor 100% focused on solving climate change. We believe that sustainable investing is not just an important climate solution, but a smart way to invest. We follow ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. Much of our research comes from leading organizations in the climate space, such as Project Drawdown and the International Energy Agency (IEA). Our goal is to deliver the most understandable and comprehensive explanations of climate and finance topics. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including MarketWatch, Bloomberg, Axios, TechCrunch, Forbes, NerdWallet, GreenBiz, Reuters, and many others. We strive to empower readers with the most factual and reliable climate finance information possible to help them make informed decisions. } ```json { "@context" : "https://schema.org", "@type" : "Organization", "alternateName" : "Carbon Collective", "contactPoint" : { "@type" : "ContactPoint", "areaServed" : "US", "availableLanguage" : "en", "contactType" : "customer service", "telephone" : "(650) 868-2697" }, "logo" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png", "name" : "Carbon Collective Investing LLC", "sameAs" : [ "https://www.facebook.com/carboncollectiveinvesting/", "https://twitter.com/carbncollective", "https://www.instagram.com/carbon.collective/", "https://www.youtube.com/channel/UC769Y-F-L_B37kyQfdpvyXA", "https://www.linkedin.com/company/carbon-collective/", "https://www.crunchbase.com/organization/carbon-collective", "https://adviserinfo.sec.gov/firm/summary/310129", "https://www.wikidata.org/wiki/Q110243690" ], "url" : "https://www.carboncollective.co/" } ``` ```json { "@context" : "https://schema.org", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The minimum age for a qualified retirement plan depends on the type of plan. For 401(k)s, the minimum age is 21. For 403(b) plans, the minimum age is 18." }, "name" : "1. What is the minimum age for a qualified retirement plan?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "There is no specific maximum age for qualified retirement plans. However, employees must begin taking required minimum distributions by April of the year following the year in which they turn 70 ½." }, "name" : "2. What is the maximum age for a qualified retirement plan?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The IRS requires the employee to complete one year of service before they are eligible to participate in a qualified retirement plan." }, "name" : "3. What is the minimum service requirement for a qualified retirement plan?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The amount you can contribute to a qualified retirement plan depends on the type of plan and your income level. For 401(k)s, the maximum contribution was $18,000 in 2017. For 403(b) plans, the maximum contribution was $54,000 in 2017." }, "name" : "4. How much can I contribute to a qualified retirement plan?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The amount your employer can contribute to a qualified retirement plan depends on the type of plan and your income level. For 401(k)s, the maximum contribution was $18,000 in 2017. For 403(b) plans, the maximum contribution was $54,000 in 2017." }, "name" : "5. How much can my employer contribute to a qualified retirement plan?" } ] } ``` ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "https://20345524.fs1.hubspotusercontent-na1.net/hubfs/20345524/Brooke%20Tomasetti.png", "url" : "https://www.carboncollectiveinvesting.com/sustainable-investing/author/brooke-tomasetti" }, "dateModified" : "2024-10-01", "datePublished" : "2022-06-29", "description" : "When it comes to saving for retirement, there are a lot of options out there. One popular option is a qualified retirement plan. But what exactly is a qualified retirement plan?", "headline" : "Qualified Retirement Plan | How It Works, Investing, & Taxes", "image" : "https://20345524.fs1.hubspotusercontent-na1.net/hubfs/20345524/Qualified_Retirement_Plan.png", "mainEntityOfPage" : { "@id" : "https://www.carboncollectiveinvesting.com/sustainable-investing/qualified-retirement-plan", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png" }, "name" : "Carbon Collective" } } ```