Individual 401K Rollover

If you're poking around for Individual 401K Rollover info, you're at the correct place for answers! 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 go over and hopefully learn from. 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 easy and painless for you. Here you go...

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Do you wonder if 401k's are a smart idea?

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.

Individual 401K Rollover 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.

Terms - Definitions:

Summary Plan Description (SPD): The SPD overview of the rules and benefits of a 401(k) plan. The DOL requires the plan administrator provide a copy of the SAR to each employee participating in the plan.

Full-Service Plan: In the context of this website, a full-service plan is any 401k plan in which you pay people outside of your company to provide the plan's administration, investments and other services. One or more companies may take care of these duties, depending on the plan and its provider.

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Rules you need to know about 401(k):

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'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: 401K Maximum Distribution, retirement account, or Take A Loan From My 401K