401K Retirement Savings Plan

If you're sick of trying to find 401K Retirement Savings Plan 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 questions asked most often you can go over and review. We hope you find this page to be helpful and informative for you! Picking and choosing the right retirement program can be hard if you don't know what you should be looking 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 painless and easy. Here you go...

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Why it's smart to have a 401k:

Most of your plan's investment choices are managed by professionals

Many of the investment options in your company's 401(k) plan are mutual funds. By investing in mutual funds, you place your money in the hands of a highly experienced team of investment professionals. Most funds are managed by a portfolio manager, and a global team of dedicated analysts works behind the scenes to provide in-depth research and analysis on thousands of companies, securities, and other investment opportunities. They do the work, so you don't have to.
Your plan may also include other investment options that aren't actively managed, such as index funds, funds of funds, or options other than mutual funds, such as a company stock fund or a commingled pool. Please see your plan materials for more information.

401K Retirement Savings Plan Tips:

Should you ever take a loan from you 401(k) plan? Here's a brief discussion of pros and cons. The pros are that it's convenient (no credit check or lengthy approval process), the interest rate is relatively low (a few points over the prime rate), and you pay the interest to yourself (not a bank or credit card). The cons are that your money is not growing for you while it is out of your account, there may be fees involved, the loan must be paid back immediately if you change jobs, and a loan default is treated as an early withdrawal (with taxes and penalties due). Given the total lack of job security that most workers have in 2005, there are considerable risks to this type of loan.

Terms You Should Know:

Vesting: The portion of a participant's 401(k) account balance that they are entitled to under the plan's rules. Depending on the provisions of the plan, employees become "vested" over a pre-determined period of time, incrementally over a period of years.

Expense Ratio: The annual fee charged to mutual fund shareholders (usually as a percentage of total investment) for the administration, operation and management expenses associated with a particular fund. May include management fees, 12b-1 fees and other fees, but does not include sales charges. Shows the actual amount that a fund takes out of its assets each year to cover its expenses.

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Rules you need to know about 401(k):

Loans from 401(k) plans.
Some 401(k) plans permit participants to borrow from the plan. The plan document must specify if loans are permitted. A loan from the 401(k) plan is not taxable if it meets the criteria below.

Generally, if permitted by the plan, a participant may borrow up to 50% of his or her vested account balance up to a maximum of $50,000. The loan must be repaid within 5 years, unless the loan is used to buy the participant’s main home. The loan repayments must be made in substantially level payments, at least quarterly, over the life of the loan.

The participant must reduce the $50,000 amount, above, if he or she already had an outstanding loan from the plan (or any other plan of the employer or related employer) during the 1-year period ending the day before the loan. The amount of the reduction is the participant’s highest outstanding loan balance during that period minus the outstanding balance on the date of the new loan.

What's a 401k plan? Here's A Quick Overview...

Employer-sponsored retirement plans are normally grouped into 2 major categories: Defined Benefit (DB) and Defined Contribution (DC).
In a DB plan, the employer promises to pay a defined amount to retirees who meet certain eligibility criteria. In other words, the plan defines the benefit to be received. In its most typical form, a DB plan pays a lifetime monthly benefit to retirees who reach specific age and service requirements. Benefits are usually linked to the amount of service and based on final average salary. Employees can reasonably rely on a known and expected benefit level; although protection against post-separation inflation is usually limited and/or uncertain. The plan sponsor may also provide an alternative lump-sum "cash-out" of the benefit entitlement. Until relatively recent times, the DB was the dominant form of employer-sponsored retirement program.

In DC plans, the plan defines the contributions that an employer can make, not the benefit that will be received at retirement. The terminating employee receives the proceeds in a current or deferred lump sum or annuity. Since the benefit is not defined, the retirement outcomes are not known in advance.

**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: Roth 401K Rules, roth ira, or Can I Deduct My 401K