401K Save Harbor

If you're looking around the net for 401K Save Harbor info, then your in luck! This page is loaded down with explanations on how 401k's work plus there are all kinds of tips, tricks and FAQ's you can go over and hopefully learn from. We hope you find this page to be helpful and informative for you! Finding the correct retirement program can be tough if you don't have all the facts, 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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Important reasons to have a 401k:

Your money can go with you, job to job

One of the reasons why plans like 401(k)s have become so popular is that they are portable: generally speaking, you can take them from job to job (with some exceptions). If you decide to change jobs, you have three options for your contributions: You can roll your eligible rollover assets to and from 401(k), 403(b) and governmental 457(b) plans, provided your new employer's plan accepts these rollovers.

401K Save Harbor Tips:

401k plans offer many benefits including the following:

Any business, whether a C Corporation, S Corporation, partnership, sole proprietorship, self-employed can establish Plan.
The company sets the eligibility requirements, within certain guidelines, at the time the plan is established.
Employer can restrict individuals with less than 1 year service, union members, non US citizens, part-time workers, etc.,from being eligible for the plan.
Contributions to plan can come from voluntary employee salary reduction, from employer, or both.
Each individual employee can defer in 2008 up to $15,500 or 100% of compensation, whichever is less.
Participants age 50 and over can make additional "catch-up" contributions of $5,000.
Employees are immediately 100% vested with their own salary reduction tax deferred contributions.
Employee withdrawals before age 59 1/2 may be subject to 10% penalty.
Employees who retire any time during the calendar year in which they turn 55, or later, are not subject to the 10% penalty.
Employers can establish a vesting schedule, within certain guidelines, for the contribution the company makes to the 401k.
Employers are not required nor obligated to make any contribution to the 401k, although employer may have some obligation to contribute if plan is deemed top heavy.
Turnkey and Internet based plans are available.
Excellent range of investment options available for the plan sponsor to offer within the plan.
The investment choices in most plans range from 8 to 20 options. The average plan has about 15.
401k plans may permit "self-directed investment accounts" and company stock purchase within the plan.
Employee contributions to the plan are not subject to federal income taxes until a distribution from the plan is made. Any investment gains and earnings also enjoy tax deferral until distribution.
This type of plan can permit loans and hardship withdrawals.
Participants can start, stop contribution during course of year, as determined by the company.
The employer can receive certain tax benefits for contributions.
Plans are subject to top heavy and discrimination testing.
Typically the amount the owners and highly compensated individuals can contribute to a 401k is a function of the contributions of the other employers.
401k plans can be subject to IRS 5500 filings.
Generally, the vendor selected by the plan sponsor does all accounting, participant reporting, testing, and files 5500 reports with the IRS.
401k plans have proven to be popular with employees for several reasons. The tax deferral is obviously high on this list of reasons. Others include the increased portability of this plan, employer matching contributions, and the increased control associated with self-direction of investments.

Terms You Should Know:

No-Load Fund: Mutual fund investments that do not charge front-end (purchase) or back-end (liquidation) fees; load mutual funds do, however, involve annual management fees.

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

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Important 401(k) Rules:

General Distribution Rules:
Hardship Distributions. A distribution is deemed to be on account of an immediate and heavy financial need of the employee if the distribution is for:

*Expenses for medical care previously incurred by the employee, the employee’s spouse, or any dependents of the employee or necessary for these persons to obtain medical care;
*Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments);
*Payment of tuition, related educational fees, and room and board expenses, for the next 12 months of postsecondary education for the employee, or the employee’s spouse, children, or dependents;
*Payments necessary to prevent the eviction of the employee from the employee’s principal residence or foreclosure on the mortgage on that residence;
*Funeral expenses; or
*Certain expenses relating to the repair of damage to the employee’s principal residence.

Distribution necessary to satisfy financial need. A distribution may not be treated as necessary to satisfy an immediate and heavy financial need of an employee to the extent the amount of the distribution is in excess of the amount required to relieve the financial need or to the extent the need may be satisfied from other resources that are reasonably available to the employee.

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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