IRA government retirement plans question.?

What are the government sponsor retirement plans, the penalties for early withdraw and the maximum per year.

the meaning of mutual funds.

why is mutual funds safer than stock investments?

Mutual funds are more diverse than individual stocks -- if you give $100 to a mutual fund, they invest it in hundreds of stocks, a few pennies at a time. So when one stock goes down, another goes up and you're not gambling all your money on just a couple companies -- you're spreading it across an entire class of companies.

To research government sponsored retirement plans such as 401ks, visit http://irs.gov and search for "401(k)". Their web page is actually pretty darn good. You can't just skim the information though -- you have to read for comprehension and take in the knowledge.

Good luck,

Doug

A mutual fund is a fund operated by an investment company that invests in one or more categories of assets, including stocks, bonds and money market instruments. All shareholders share in the gains and losses generated by the fund on an equal basis, proportional to the amount initially invested.

A Mutual Fund is general considered safer than stock investments for a couple of reasons. Mutual funds offer investors diversification and professional money management. Diversification means that the Mutual Fund will invest into companies of different sectors of the economy. For example, a Mutual Fund can invest in Verizon & General Motors. These company provide different products & will be affected by different market factors i.e. when one stock goes down the other may not or may even go up. This is the effect of diversification it reduces the risk of large movements in value. So you may not lose as much if General Motors goes under when you also own Verzion. The second part is the Professional money management, the idea here is that the professional is better equiped to research companies & pick which stocks to invest into.

The first part of your question is a little more difficult to answer. All retirement plans are regulated by the government (by the IRS). Some of the different types of retirement plans are IRA, Roth IRA, SEP IRA, SIMPLE IRA, 403(b), 457, 401k, MPPP, PSRP, etc. There are many different types and many different rules for each. The rules are spelled out in different IRS publications, the internal revune code, or EGTRRA of 2001.

The second part of your first question you would need to refer to the IRS publication and/or EGTRRA of 2001. For example on an IRA or Roth IRA look in IRS publication 590 for distribution penalities. Per EGTRRA of 2001, the maximum for an IRA contribution in years 2006 and 2007 is 100% of earned income or $4,000, whichever is less, for an individual under the age of 50. Individuals aged 50 and older can contribute up to 100% of earned income or $5,000 whichever is less. Note if you have reached the age 70 & 1/2 you cannot contribute to an IRA, but you can contribute to a Roth IRA.