Category Archives: 401K Plan
Employers generally administer and provide 401K plans for their employees. Workers normally contribute their own money into the 401Ks to provide for retirement and matching funds are contributed by employers at a predetermined amount of the employee’s income.401K rules can be confusing, but it is important for employees to understand
Small business 401K plans can be powerful tools in recruiting and retaining potentially good employees. 401K plans provide financial security for retirement and are listed as one of the top benefits employees seek. You need to consider providing 401K retirement plans for your employees even if you are a small company.
The state where divorcing couples reside will determine the property allocation laws and joint marital property. Many states’ legislation allows ex-spouses to keep property they used to own before their marriage, but after marriage any jointly owned accounts are divided under set rules. This includes 401k accounts that list the spouse as beneficiary.
A Mercer 401k can be a great 401k plan for most people, and Mercer is a name that is known and trusted in the financial sector. There are a number of plans that can be tailored to fit the company and employee needs. These plans are considered some of the best 401k plans available, and Mercer provides three core services. These are consulting, outsourcing, and investing concerning pension and retirement funds.
Borrowing against 401k account balances can be tempting, and most plans allow loans in a number of situations. The good news is that loans from your 401k are not charged a ten percent early withdrawal penalty, and you will not have to pay taxes as long as the loan is not in default or you do not quit your job before the loan is paid off. Using 401k to buy a house or pay college costs is almost never advised by financial experts though
What are the best 401k plans for small businesses? The answer will depend on the specific small business, because some only have owner operators while other companies may have employees who are not owners of the business. Small business 401k plans can vary widely, and self employed individuals can benefit greatly from the increased contribution limits that 401k plans offer. A small business with just a few employees will have simpler requirements
1. Automatic Deductions- One of the top 401k benefits is that your contributions are directly deducted from your earnings. This makes your retirement fund contributions easy and convenient, because you do not have to do anything for the contribution to be made.
2. Tax Deductible Contributions- All contributions to 401k retirement plans are tax deductible, and are deducted before taxes are calculated.
The 401k distribution rules outline exactly when these distributions can be made without the ten percent tax on early withdrawals being assessed. Cashing out 401k plans can have enormous and devastating tax consequences, because ten percent of the amount that you withdraw is the penalty owed unless you meet certain conditions.
The 401k withdrawal penalty is one that can be costly at ten percent, and this penalty is assessed if you withdraw from you account before you turn fifty nine and a half years old, with certain exceptions. The law does allow you to make a 401k hardship withdrawal in some circumstances, and this withdrawal may not be assessed the tax penalty as long as verification of the circumstances can be shown.
401k retirement plans are a very popular option, but what happens to your plan when you are going through a divorce? These plans are governed by many different rules, 401k contribution limits, and withdrawal allowances. An early withdrawal from your plan could result in a ten percent early withdrawal penalty from the IRS, but if the plan is divided as an asset during divorce proceedings this penalty will not apply as long as certain steps are followed.
Cashing out 401k plans to purchase a home can be done, but is this a smart financial move or is it a very bad idea? Before you make any decisions that could have serious financial consequences you should always seek 401k investment advice from an expert, to make sure that you are doing the right thing concerning your finances and future retirement. Many plans allow a withdrawal without any additionally penalties if the withdrawal is made to purchase a home, pay off specific medical bills, or for certain other reasons which are very limited. Cashing out 401k account balances can help you come up with a down payment, or even the balance of the purchase price in some cases, but is this step really beneficial?
401k investment advice can include many dos and don’ts, and this advice can help every investor maximize the benefits and minimize the risks associated with this type of account. One of the biggest and most important tips is to make the maximum 401k contribution per year, whether there is an employer match provision or not. Many people make the mistake of not participating in an available 401k at all, or not contributing as much as possible to this account. Another thing that should done is an expense comparison for each possible investment choice. Some plans or plan investments may involve higher costs, which deduct from the capital working for the investor. 401k investment advice should be sought before any investment is made, unless the investor is completely sure of the option and has experience with this type of plan.
Understanding all of the self directed 401k rules is extremely important if you own or are considering one of these accounts. There are certain prohibitions and restrictions in place with this type of retirement plan that other options may not include. A self directed plan allows more flexibility in investment choices, but can also carry higher risks because the account holder can choose a wider range of investments and can incur increased risks. There are still 401k contribution limits in place, and withdrawal restrictions and penalties which may be involved. There are additional rules and regulations concerning what investments can be chosen for a self directed 401k as well, and these are very important.
A 401k investment is a very smart move for most people, but what is the average 401k balance by age? This is a question many people wonder, because of the 401k contribution limits and other factors involved. Answering this question must take into account the employment tenure of the group as well, not just their age. Some individuals who are in their forties and fifties may have very small account balances because of numerous employers and limited contributions, if any. An individual in their late thirties could have a substantial nest egg built up in their 401k investment if they started with the same employer at eighteen or twenty, and are still there, because of the average 401k balance by age.
Many plans allow borrowing from 401k accounts, and this loan is paid back with interest. For some individuals the temptation to take advantage of this to pay off mounting credit card debts can be high, and this may be a good or bad thing depending on the specific situation and circumstances. Unlike a 401k hardship withdrawal, which does not have to be paid back and involves a steep penalty, a loan from your account must be paid back. The upside of borrowing from 401k plans is that the interest you pay on this loan goes back into your account.
A third party administrator 401k is a plan that uses an independent third party to administer many aspects of the plan. This method has both pros and cons, and can be used for both large and small business 401k plans successfully. With some other plan types the administration of the plan may be done by the business owner, another company employee, or the company offering the plan. A third party administrator 401k uses an outside resource for this job instead, and some say this complicates matters but others believe it results in more benefits and fewer problems for a number of reasons. For some the choice in IRA vs 401k may rest on how the specific plans offered are administered.
What is the definition of a safe harbor 401k? This is a specific type of 401k plan that is available to many employees, but there are some unique factors involved with this type that may make it a better choice. This type of plan first became available in 1996, when the Small Business Job Protection Act allowed 401k plans to use simpler methods to meet the requirements for non-discrimination in these plans. The maximum 401k contribution per year may allow for certain catch up contributions with this plan type, just like with other versions, and any plan which uses the alternative method to prevent discrimination is classified as a safe harbor 401k.
A 401k hardship withdrawal may seem like a solution when money is tight and you need financial assistance, but there are some rules in place that you should remember before deciding to take this money out of the account. For some individuals borrowing from 401k plans may be the only option to ease a financial hardship, and this is allowed under the rules and is permitted by most employers. An employer does not have to allow this option though, so you should check your plan first before evaluating this option. A 401k hardship withdrawal will make you ineligible to contribute to your 401k plan for six months following the withdrawal.
401k rollover to IRA can be taxable, but it may not be depending on exactly how this transfer is handled. In addition, expensive penalties may apply if you are below fifty nine and a half years old and you receive any of the funds before they are placed in either a Roth IRA account or traditional IRA. Whether you have a traditional IRA or the Roth version does make a difference in the tax liability. Traditional IRA accounts use pre tax dollars, and no tax is paid until the funds are withdrawn. A Roth account works backwards, so that the taxes are taken when the money is earned, and your withdrawals during retirement are tax free. This can complicate a traditional 401k rollover to IRA in a Roth version.