401(a)

Everyone's familiar with the 401K and the IRA system.

There's an entire secondary system called the 401A system.

You know they're very similar because they start with the same letters, numbers, 401, if I said letters, right? 401, 401, and they switch the letters to A and K.

So that means they're similar, related, but a little bit different, that they occupy different sections of the tax code.

Who is this for, Jason? You get to unlock the power, the opportunity to explore a 401A if you have active self-employed income.

That's the broad.

Now, we'll go specific by entity type, and I'll give everybody exactly what to look for.

So if I just formed an LLC, if Jason and I formed an LLC and we bought some mineral rights in Texas, we would get a K-1, but it's not active income.

Southwest, you've got two.

You've got the top hat plan where you can save up to $50,000, and then you have the 401A-17 plan, which is designed to collect all your spill beyond what the market-based cash balance plan would do.

You know, the thing is that these deferred comps, they are what you call non-qualified deferred compensation plans, meaning so the qualified ones are your retirement accounts or your 401ks and so on.

Those have some very strict rules about what the company can do or can't do with the funds that are set aside for you.

If you're working at an airline with a lot of debt on the balance sheet, and you have a long career, you might be a little more concerned, or you might be a little bit more strategic about how much of your money that you put in these deferred compensation plans.

And here's the thing.

Whether it's the Southwest Top Hat plan, it's the 401A-17 plan, or whether it's the Delta deferred comp plan, its function is in the name, right? It's deferred.

So you're choosing not to receive a paycheck today.