Saving and investment accounts are very popular tools to achieve financial goals for the short and the long terms. Financial goals would be saving for high education, retirement, growth and income and many more. Each type of investment has elements of the investment amount, the risk, the return on the investment, taxes, fees and the period that the investment is held. This article refers to saving accounts based on mutual funds, bonds and other securities, but not stocks. Most saving accounts are managed by Banks, Insurance companies and Professional Money Management (PMM) institutions.

Qualified plans:
Plans that qualified for tax benefits. The plans are offered to investors that have social security numbers, or tax identification number. The main purpose for the qualified plans is to encourage investors save money over time for their retirement, or for higher education. The majority of the plans are managed by financial institutions and insurance companies. It is common to ROLLOVER one qualified plan to another.

Non-Qualified plans:
Plans that designed to achieve short and medium financial goals. Such goals may be growth, income, keep the money value above the inflation rate and more.
There is no tax benefit for non-qualified plans. Any profit on the principal considered as income for ordinary tax.

Who is qualified to invest?
1. Anyone with a bank account in the US can open a non-qualified saving plan.
2. Anyone over age 18 that have social security number (SSN) or tax identification number (TIN) may invest in qualified saving plans.

Israelis who consider to invest in the US
Many of the non-qualified investment plans are open for Israelis who are not citizens or Green card holders. . In general open a bank account in the US is the first and most important step to take.
There are non-qualified plans such as annuities and some mutual funds related plans that require minimum time of residency in the US.

To open a qualified investment plan, the investor has to have:
1. Social Security number
2. If the plan offered as benefit by the investor's company, a legal working permit is required.
3. For individual qualified plans, a legal immigration status and minimum residency in the US may be required.

Types of investments:
It is common to invest in mutual funds, financial indexes such as the S&P 500, NASDAQ 100, bonds, bank saving accounts and other securities.

Common qualified plans are 401(K), IRA, Roth IRA, Annuities, VUL, Educational IRA, 529 for higher education plans and many others.

Common non-qualifies plans are: Money market, CDs, mutual funds based saving accounts, bank saving accounts and others.

Many companies match their employee's contributions, up to a maximum limit as an additional benefit.

The major benefits for these plans are:

1. Investors may put up to 50% from their salary, limited to $11,000 per year.
2. Money is invested pre-tax.
3. There is no tax penalty if the money withdrawn after age 59.5.
4. The growth is tax deferred.
5. The 401(K) may be rolled over to another qualified plan if the investor leaves the company.
6. There is risk with this investment

Rollover 401(K) plans.
It is recommended to rollover existing 401(K) and similar plans to another qualified plan when the investor leaves his/her company. Once the funds rolled over, the investor has better control on the funds and significantly more investment options to choose from, compared to the options offered by his/her former company.
In some cases the 401(K) funds must be rolled over when leaving the company, otherwise the investor may have to pay high taxes on the investment.

Traditional IRA
Very popular qualified plan, offered to anyone with social security number.
Funds are invested in a personal saving account. The investor can choose from thousands of mutual funds as their investment engine. It is recommended to consult by a securities licensed agent for the investment selections.

The major benefits for this plan are:

7. Investors may invest up to 3,000 per year (in 2004)
8. Funds may be eligible for tax benefits, based on the investor's annual income and other conditions.
9. There is no tax penalty if the money withdrawn after age 59.5.
10. The growth is tax deferred.
11. Traditional IRA may be rolled over to another qualified plan.
12. Anyone can open a Traditional IRA account.
13. There is risk with this investment

ROTH IRA
Very popular qualified plan, offered to anyone with social security number.
Funds are invested in a personal saving account. The investor can choose from thousands of mutual funds as their investment engine. It is recommended to consult with a securities licensed agent for the investment selections.

The major benefits for this plan are:

14. Investors may contribute up to 3,000 per year (in 2004), if they make at least this amount as an income.
15. Funds are invested after- tax, possible tax-free distributions.
16. There is no need to withdraw the funds before age 70 1/2
17. The funds may be withdrawn tax-free if the investor's age is over 59 1/2 and the funds are held in the account for at least 5 years.
18. The growth is tax deferred.
19. There is risk with this investment
20. Investors may roll over traditional IRA or 401(k) funds to a Roth IRA account, if they make less than a certain income per year.

Educational IRA
Qualified plan designed to help investors with high education expenses.
Investors may save up to 2000 per student (under age 18) per year (in 2004).
The allowed investment amount is tied to the annual income of the investor.
Distributions are tax free if the funds are used for higher education.

Fixed Annuities
A plan offered by insurance companies, this is not a security.
Fixed annuity may be qualified or non-qualified investment.

Major benefits offered for this plan are:

21. Guaranteed minimum rate of return, as well as maximum of gains per year.
22. Fixed income guaranteed for life, for a certain time or combination of both.
23. New plans offer bonuses on investments for the first couple of years.
24. There is benefit of life insurance as part of the plan.
25. Funds may be invested in one payment, or over time.
26. For qualified plans, there is tax penalty if funds distributed before age 59.5.

Variable Annuities
27. Rate of return dependent on the performance of .the selected mutual funds.
28. There is risk with this investment
29. Variable income guaranteed for life, for a certain time or combination of both.
30. There is benefit of life insurance as part of the plan.
31. Funds may be invested in one payment, or over time.
32. For qualified plans, there is tax penalty if funds distributed before age 59 1/2.

College Education plans 529
State-run college savings plans (529 plans) are a great tool for parents.
The money may be used at any school you choose and for all qualified higher education expenses, including room and board.
Investment minimums are low (typically $25 a month), and there is no restriction on how much you may contribute every year unless the account is nearing the lifetime cap.

Each state determines its own lifetime contribution limit, ranging between $100,000 and $270,000. Tax benefits are limited to a certain amount each year. Investors enjoy from tax benefits from the IRS and in some cases from their state of residence.

Most 529 savings plans offer a menu of age-based portfolios, and some also offer a small selection of stock and bond funds.

Money Market
Non-qualified low-risk saving accounts that designed to give the investor a "safe place" to keep the money. The funds are always available to the investor, typically the growth is over the inflation rate.

CD (Certificate of Deposit)

CDs typically issued by banks. Investors deposit the funds for a certain time (such as 6 months), and earn pre-defined interest on it. The funds are not available to the investors before the maturity date.

Amir Mushkat is securities licensed Associate Marketing Director.
For advise please contact 301-816-9079 or amushkat@myrealbox.com