Indifidual 401K Plans

If you're sick of rummaging around for Indifidual 401K Plans info, 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 informative and easy. Here you go...

Why it's smart to have a 401k:

You can increase your take home pay, really!

Investing money through your 401(k) plan gives you the benefit of tax-deferred saving. This lets you increase your take home pay and decrease your current taxable income. Remember though, your pre-tax contributions are not tax-free, they're tax-deferred, which means that you don't pay income tax on this money until you withdraw it from the plan (which should be at retirement, when you may be in a lower tax bracket). Take a look at a hypothetical chart to see how contributing to the plan compares with saving outside the plan (in an ordinary savings, or other taxable account). Contributing to your 401(k) on a pre-tax basis can help you increase your take-home pay

Indifidual 401K Plans Tips:

401k plans offer many benefits including the following:

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.

Important Terms:

SEC: Acronym for Securities and Exchange Commission. An "independent, nonpartisan, quasi judicial regulatory agency with responsibility for administering federal securities laws"

Beta: A historical measure of the magnitude of a portfolio's past share-price fluctuations in relation to the ups and downs of the overall market (or appropriate market index). The market (or index) is assigned a beta of 1.00, so a portfolio with a beta of 1.20 would have seen its share price rise or fall by 12% when the overall market rose or fell by 10%.

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Rules about 401ks:

Tax on early distributions.
If a distribution is made to a participant before he or she reaches age 59½, the participant may be liable for a 10% additional tax on the distribution. This tax applies to the amount received that the employee must include in income.

Exceptions. The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances:

*Made to a beneficiary (or to the estate of the participant) on or after the death of the participant.
*Made because the participant has a qualifying disability.
*Made as part of a series of substantially equal periodic payments beginning after separation from service and made at least annually for the life or life expectancy of the participant or the joint lives or life expectancies of the participant and his or her designated beneficiary. (The payments under this exception, except in the case of death or disability, must continue for at least 5 years or until the employee reaches age 59½, whichever is the longer period.)
*Made to a participant after separation from service if the separation occurred during or after the calendar year in which the participant reached age 55.
*Made to an alternate payee under a qualified domestic relations order (QDRO).
*Made to a participant for medical care up to the amount allowable as a medical expense deduction (determined without regard to whether the participant itemizes deductions).
*Timely made to reduce excess contributions.
*Timely made to reduce excess employee or matching employer contributions.
*Timely made to reduce excess elective deferrals.
*Made because of an IRS levy on the plan., or
*Made on account of certain disasters for which IRS relief has been granted.

Reporting the tax. To report the tax on early distributions, a participant may have to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.

What is a 401(k)?

A 401(k) is a type of retirement plan that allows employees to save and invest for their own retirement. Through a 401(k), you can authorize your employer to deduct a certain amount of money from your paycheck before taxes are calculated, and to invest it in the 401(k) plan. Your money is invested in investment options that you choose from the ones offered through your company's plan. The federal government established the 401(k) in 1981 with special tax advantages, to encourage people to prepare for retirement. They get their catchy name from the section of the Internal Revenue Code which established them (you guessed it, section 401(k)).

**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: Good 401K Plans, 401k's, or 401K Pre Tax Or