401K Laws

If you're sick of surfing the web for 401K Laws information, you're at the right website my friend! This page is loaded down with explanations on how 401k's work plus there are all kinds of tips, tricks and frequently asked questions you can read over and review. We hope you find this page to be helpful and informative for you! Choosing the right retirement program can be a bit 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 fast, easy and helpful to you. Here you go...

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Why it's smart to have a 401k:

There are many advantages to saving for retirement through your workplace retirement savings plan, including a potential match from your company, as well as professional management of your investments. The best reason to save in your plan is plain and simple: it's up to you to save and invest for your own future.

Here are seven more reasons:

* You can increase your take home pay, really
* A company match can help your investments grow
* Automatic payroll deduction makes it easy to save
* Most of your plan's investment choices are managed by professionals
* Most plans allow access to your contributions in an emergency
* Account services keep you informed
* Your money can go with you, job to job

401K Laws Tips:

Let's cover the IRS limits. First, a person's maximum before-tax contribution (i.e., 401(k) limit) for 2005 is $14,000. It's important to understand this limit. This figure indicates only the maximum amount that the employee can contribute from his/her pre-tax earnings to all of his/her 401(k) accounts. It does not include any matching funds that the employer might graciously throw in. Further, this figure is not reduced by monies contributed towards many other plans (e.g., an IRA). And, if you work for two or more employers during the year, then you have the responsibility to make sure you contribute no more than that year's limit between the two or more employers' 401k plans. If the employee "accidentally" contributes more than the pre-tax limit towards his or her 401(k) account, the employee must contact the employer. The excess might be refunded, or might be reclassified as an after-tax contribution.

Terms - Definitions:

Portfolio: The combined holdings of stocks, bonds or other securities and assets a mutual fund company owns. Also, the combination of stocks, bonds and other securities and assets an individual person owns.

Emerging Growth Fund: Seek rapid growth of capital and that may invest in emerging market growth companies without specifying a market capitalization range. They often invest in small or emerging growth companies and are more likely than other funds to invest in IPS's or in companies with high price/earnings and price/book ratios. They may use such investment techniques as heavy sector concentrations, leveraging and short-selling.

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401k Rule:

401k Rules Regarding Contribution:

* In 2005, the cap for individual contribution was $14,000.This number increased to $15,000 in 2006, and after 2006, the cap adjusts annually in $500 increments.
* The maximum total amount contributed to your 401k plan is the lesser of 100% compensation or $42,000.
* If you’ll be age 50 or older by the end of the year, you may make an additional “catch-up”contribution each year. The maximum “catch-up”contribution was $4,000 in 2005 and $5,000 in 2006 and goes up each year.
* For highly compensated employees (those with income in excess of $95,000 in 2005), they may not be allowed to contribute at the maximum rate in the company.
* You can only contribute money to your 401k plan by automatic payroll deduction.
* You may not get your employer’s match if you leave your employer in less than three years. However, more and more companies have began offering immediate vesting to their employees

401k Rules Regarding Loans:
Not all 401k plans allow you to borrow from your 401k plan. And if it is allowed, the most you can borrow is the lesser of 50% of your vested balance or $50,000.

* You have to repay your loan in 5 years, unless the loan isused to purchase your primary residence.
* The interest you pay on your loan is subject to double taxation---you pay the interest with after-tax money and it is subjected to taxes when you eventually withdraw it.
* When you leave your company, you may have to pay back the outstanding balance in full. Otherwise, the outstanding amount will be subject to a possible 10% early withdrawal penalty.
* If you default on your loan, the outstanding balance is also subject to a possible 10% early withdrawal penalty.

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.

Other words associated with this page and topic would be: Maximum Contribution For 401K, 401k's, or Roth 401K Account