401K Investment Choices

If you're hunting around for 401K Investment Choices information, you're sure at the right webpage! This webpage is full of advice and explanations on how 401k's work plus there are all kinds of tips, tricks and questions asked most often you can go over and review. We hope you find this page to be helpful and informative for you! Finding and choosing the right retirement program can be overwhelming if you don't know what to look for, so we've set this page up with as much 401 k information as we could get for you and made sure it's helpful to you. Here you go...

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Reasons why you'd want to put your money in a 401k:

There are many advantages to 401(k) plans. First, since the employee is allowed to contribute to his/her 401(k) with pre-tax money, it reduces the amount of tax paid out of each pay check. Second, all employer contributions and any growth in the capital grow tax-free until withdrawal. The compounding effect of consistent periodic contributions over the period of 20 or 30 years is quite dramatic. Third, the employee can decide where to direct future contributions and/or current savings, giving much control over the investments to the employee. Fourth, if your company matches your contributions, it's like getting extra money on top of your salary. Fifth, unlike a pension, all contributions can be moved from one company's plan to the next company's plan (or to an IRA) if a participant changes jobs. Sixth, because the program is a personal investment program for your retirement, it is protected by pension (ERISA) laws. This includes the additional protection of the funds from garnishment or attachment by creditors or assigned to anyone else, except in the case of domestic relations court cases dealing with divorce decree or child support orders (QDROs; i.e., qualified domestic relations orders). Finally, while the 401(k) is similar in nature to an IRA, an IRA won't enjoy any matching company contributions, and personal IRA contributions are subject to much lower limits.

401K Investment Choices Tips:

I recently left my job and want to know how long my former employer can hold my account balance from my date of termination?

Answer: There are a number of factors that will impact the timing of your distributions:

How quickly you complete and submit the proper forms.
The plan itself. Most document the time frame which will be followed in the plans Summary Plan Description (SPD). You got a copy of the SPD when you enrolled and annually thereafter. You can also request a copy at any time. Read up on when your plan makes distributions, but you should know that some plans only make distributions annually. In a few rare cases, distributions are not made until you reach retirement age.
The plans valuation cycle. Your distribution cannot be processed until the plans next valuation date. This is when the plan determines the account balances of each participant. Most plans today determine account balances daily, but there are still lots of plans that only do it monthly, quarterly, semiannually or even annually. Be sure to ask about your plans valuation cycle when you submit the distribution forms.
The paperwork cycle. Once you account has been valued, processing your forms can take as little as a few days or as long as a couple of months. It all depends upon on how the plan is administered.

Glossary & Terms:

Passive Enrollment (a.k.a., automatic enrollment or negative elections): When employees are automatically enrolled in the 401k plan as soon as they meet the plan's eligibility standards. Default investments (usually a money market fund) and a default contribution rate (usually 3% to 5% of the person's compensation) are preset by the employer. All passively enrolled employees must be immediately notified of their new 401k participant status, and they must be given the opportunity to change from the default contribution rate and/or investment selection (and, of course, given the opportunity to withdraw from the plan entirely). The small amount of money that was placed in the 401k for a new employee who cancels participation soon after automatic enrollment must stay in the plan until the person's employment is terminated.

Corporate Bond Fund--General: Seek income by investing in fixed-income securities, primarily investment-grade corporate bonds.

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401k Rule:

Rollovers from a 401(k) plan. A rollover occurs when the participant receives a distribution of cash or other assets from one qualified retirement plan and contributes all or part of the distribution within 60 days to another qualified retirement plan or traditional IRA. This transaction is not taxable but it is reportable on Form 1099-R and the participant’s federal tax return. A participant can roll over most distributions except for:

*A distribution that is one of a series of payments based on life expectancy or paid over a period of ten years or more,
*A required minimum distribution,
*A corrective distribution of excess deferrals or contributions (including income allocable to these amounts),
*A hardship distribution, or
*Dividends on employer securities.

After-tax employee contributions can only be rolled over to a traditional IRA or to certain defined contribution plans.

Any taxable amount that is not rolled over must be included in income in the year received. If the distribution is paid to the participant, he or she has 60 days from the date received to roll it over. Any taxable distribution paid to a participant that is eligible for rollover is subject to mandatory withholding of 20%, even if the participant indicates that he or she intends to roll the distribution over later.

If the participant is under age 59 ½ at the time of the distribution, any taxable portion not rolled over may be subject to a 10% additional tax on early distributions.

What makes a good 401 k?

Since your 401k plan is one of your most important retirement savings vehicles, you want it to be as good as
possible. Here are the features that we think make a really good 401k plan.

-Immediate eligibility
-Valued daily
-Generous Employer match
-Maximum contribution can be made each year, i.e., the plan places no restrictions on the amount
-Low expenses or the plan sponsor pays most fees
-Both internet and voice access for checking performance, balance, making changes, etc.
-Name brand no-load mutual funds as investment options are offered
-At least 12 investment options available, including both passive (index) and active investment (actively managed) funds
-Loans and hardship withdrawals available
-Newsletters, fund prospectus, investment performance information and some type of education seminar and/or advice product
offered.

**Disclaimer** The information on this page is as accurate as we could get it but is meant for information purpose only. It's not meant to be legal advice in which you use to make financial decisions. For any legal or financial matters, you should seek out a certified 401k or investment company or individual.

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