Which type of retirement plan is tax-qualified?

A tax-qualified retirement plan is one that meets the requirements set forth by the Internal Revenue Service (IRS) and offers tax benefits to the contributors, as well as tax-deferred growth on the investment.

A defined contribution plan is indeed a type of tax-qualified retirement plan. In these plans, both employers and employees can make contributions, and the final benefit received at retirement depends on the amount contributed and the performance of the investments over time. Contributions to a defined contribution plan are made with pre-tax dollars, resulting in a tax break for the employee at the time of contribution. The funds grow tax-deferred until they are withdrawn, typically at retirement, at which point they are subject to income tax.

Other options do have tax advantages, but they operate differently. A Simple IRA, for instance, is also a tax-qualified plan designed for small businesses that allows employees to save for retirement, but it has different contribution limits and withdrawal regulations. A Cash Balance Plan is a type of defined benefit plan that provides a guaranteed retirement benefit, but it is structured differently than defined contribution plans and has specific requirements for qualification. A Roth IRA, while offering tax-free withdrawals if certain conditions are met, is considered a post-tax contribution account, meaning contributions are made after tax,