Account Types

IRA, 401k, Health Savings & more. Learn more about these investment accounts types below.
Individuals
Business Owners
Other Accounts

Traditional IRA

TAX ADVANTAGES

Contributions are made on a pre-tax basis, meaning you can deduct that amount from your taxable income if eligible. In addition, the money in the Traditional IRA grows tax deferred, meaning any income/profit from the Traditional IRA investments are not taxed. Instead, taxes are deferred on these funds until withdrawn.

ELIGIBILITY

Anyone with U.S. earned income is eligible to open a Traditional IRA, but there are some restrictions as to who can deduct the contributions. There are income limits that are used to determine how much of the contributions are deductible, if you or your spouse are participants in an employer plan.

DISTRIBUTIONS

Distributions are required from a Traditional IRA once you reach age 73. You may delay your first Required Minimum Distribution (RMD) until April 1st of the following year but all subsequent distributions must be done by December 31st.

ROTH IRA

TAX ADVANTAGES

Roth IRA contributions are not tax-deductible, but the earnings generated from these contributions can be distributed tax-free if certain requirements are met.

ELIGIBILITY

There are income limits that are used to determine how much you can contribute, or if you can contribute at all. If you are not eligible for a contribution, you may still fund a Roth IRA via transfer from an existing Roth IRA, or roll over funds from an old employer sponsored plan.

DISTRIBUTIONS

Unlike the Traditional IRA, you are not required to take a minimum distribution with a Roth IRA once you reach age 73. Qualified distributions require both a 5 year waiting period AND one of the following to apply: Age 59 ½ or older, deceased, disabled or first time homebuyer.

SEP IRA

Tax Advantages

Contributions are made on a pre-tax basis, meaning you can deduct that amount from your taxable income. In addition, the money in the SEP IRA grows tax deferred, meaning any income/profit from the SEP IRA investments are not taxed. Instead, taxes are deferred on these funds until withdrawn.

Eligibility

Any kind of employer or business entity can establish a SEP IRA.There just needs to be one employee (in the case of a sole proprietorship, the employer and employee are the same person) and the minimum requirements are easy to meet: participants must be at least 21 years old, have worked for the business during three of the past five years, and have earned a minimum of $600 in compensation. Spouses and children of the business owner who are employed by the company and meet the requirements may also participate and open their own SEP IRAs.

Distributions

SEP IRAs require a minimum distribution that must begin at age 70½. If you do not take at least the required minimum distribution (RMD) each year, you will be subject to tax penalties. In addition, any withdrawals made before turning age 59½ will be subject to tax penalties.

SIMPLE IRA

Tax Advantages

SIMPLE IRA contributions are made on a pre-tax basis, meaning you can deduct that amount from your taxable income. In addition, the money in the SIMPLE IRA grows tax deferred, meaning any interest or profit from the SIMPLE IRA investments are not taxed. Instead, those profits are deferred until the money is withdrawn from the IRA.

Eligibility

An employer who has a SIMPLE IRA cannot have any other retirement plan where employees accrue benefits. The employer cannot have more than 100 employees who earn $5,000 or more in compensation during the prior calendar year. If the employer has any other businesses, employees of those businesses may also have to be included in the plan.

Distributions

Much like Traditional and SEP IRAs, SIMPLE IRAs also require a minimum distribution beginning at age 70½. A 25% tax penalty would apply to any early distributions made within the first two years of account establishment.

Solo 401(k)

Tax Advantages

Solo 401(k) contributions can be made either pre-tax, or post-tax, which some plans allowing for both types within the same account.

Eligibility

Must be self-employed AND cannot have any full-time employees. Plan can include spouses, children, or certain business partners.

Distributions

Solo 401(k)’s also require a minimum distribution beginning at age 70½.

Health Savings Account (HSA)

Tax Advantages

Contributions are tax-deductible and are made on a pre-tax basis. Earnings generated from these contributions can be distributed tax-free if certain requirements are met.

Eligibility

Must be 18 years or older and be covered under a “qualified high-deductible health plan (HDHP). Cannot be enrolled in Medicare, or be claimed as a dependent on another individual’s tax return.

Distributions

HSA distributions can be taken out from the account for any qualified medical expenses. For information on the types of qualified medical expenses, please click here. Portions of distributions not used for qualified medical expenses may be subject to tax unless the HSA owner is over age 65, disabled or deceased.

Coverdell Education Savings Account (CESA)

Tax Advantages

Any earnings made within a CESA are tax-deferred, but withdrawals are tax free if they are used for qualified education expenses.

Eligibility

The designated beneficiary must be under the age of 18, or be special needs at the time of account opening.

Distributions

Designated beneficiaries of the ESA can receive distributions, tax-free, to cover qualified education expenses. For information on the types of qualified education expenses, please click here. These expenses can also be paid directly from the account to the educational institution. Portions of distributions not used for qualified education expenses may be subject to tax. Funds must be distributed to the beneficiary prior to them reaching age 30, unless the beneficiary is special needs.

Qualified Plans

If you are a business owner and have an existing qualified plan (e.g. Defined Benefit Plan, Profit Sharing Plan, Pension, 401k, etc.), you may open an outsourced portion of this plan to be custodied by Next Generation for your self-directed, alternative investments.
Note: your plan documents must allow for multiple custodians and permit self-directed investments. Be sure to check with your TPA/plan advisor to confirm. Your TPA/plan advisor should continue to maintain/update your plan documents and provide any necessary tax reporting. In order to set this up, you must complete a Next Generation application and submit a copy of your plan documents.