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Are there any disadvantages of 401 k plans?

There could be. It depends on the investment opportunities offered by the account provider and at what age you plan to retire. If the plan is a standard one, rather than a Roth-401k, there could be a disadvantage, too.

Let’s take a look at your options.

Roth-401ks have only been available since 2006. Roth IRAs have been around since 1997. Traditional IRAs were written into the tax code in 1986. Standard 401k plans were actually an off-shoot of a tax law that had nothing to do with retirement plans. Continue reading ‘Let’s Face it – Are There Any Disadvantages of 401k Plans?’ »

The disadvantages of 401k plan usage are few. But, if you have the option to choose, there are several things to consider and be aware of. Here are a few things that you should know about IRAs, 401Ks and Roth plans. The information should help you choose which plan is right for you.

Do you want to pay taxes now or after you retire?

Contributions to all traditional “non-Roth” plans are tax deductible or reduce your taxable income for the year that the contribution is made. Distributions, on the other hand, are taxed as regular income. In other words, after you retire, when you begin to take money out of the account, it will be taxed as regular income.

Many people are in lower income tax brackets after retirement. People aged 65 and over get to take additional income tax deductions. So, if your earnings are high and you expect to be in a lower income tax bracket after retirement, the traditional plans may be for you. Continue reading ‘Ever Wondered About the Disadvantages of a 401k Plan?’ »

Here’s a look at the 5 biggest 401k rollover mistakes. Some of them are very common and can be costly, either in terms of losing your account’s tax sheltered status or in losing out on profits.

Remember, these things have happened to other people.

So, they could happen to you.

#1. You fail to redeposit the funds within 60 days.

The check could get lost in the mail. You could have some kind of family emergency. You might be in the process of moving and somehow lose the check. All of those things have happened to account holders at one time or another. Something interferes with them finding a new account provider and the next thing they know, they are in trouble with the IRS.

Failing to open a new account and redeposit the funds within 60 days is one of the 5 biggest 401k rollover mistakes, because, when if it happens, the entire value of the account will be taxed as regular income for that year.

The IRS will make exceptions, in some cases. For instance, victims of hurricane Katrina were given a full year to redeposit the funds. But, unless there is a blanket exemption like that one, the process is long and drawn out. The best thing to do is to pick a new account holder, before you initiate a roll-over and take precautions to insure that the check is deposited within the 60 day period. Continue reading ‘5 Biggest 401k Rollover Mistakes – Are You at Risk?’ »

The current year’s 401k contribution limits determine how much money you are entitled to contribute to your 401k plans for the entire year. This means the collective total of contributions to all 401k plans in your name cannot exceed this maximum amount. It even includes Roth 401k plans in the same total.

There are two numbers you need to collect before determining your personal maximum contribution limit. First, find out how much of your salary your employer’s plan will allow you to contribute. For example, if your employer has set up a plan that allows you to contribute up to 10% of your salary and you make $45,000 for 2009, then your employer’s limit will be a yearly contribution up to $4,500. Continue reading ‘What Are the 2009 401K Limits?’ »

While 401k investment plans are a nice way to save money for retirement, there are certain 401k rules on how much you can contribute to all of your plans collectively in a given year. The maximum 401k contribution limits change from one year to the next and apply as one figure for all of your plans, so your total must fall below the limit each year.

The maximum amount allowed to be contributed is different every person, depending on two different numbers. First, you have to determine what percentage of your income your employer’s plan will allow you to invest. This will be in percentage form. For example, someone who makes $45000 a year and has a plan that states they can contribute up to 10% of their income would be allowed to contribute up to $4, 500 in 2009. Continue reading ‘401k Rules FAQ – 401k Contribution Limits’ »

If you want to live a happy life, your personal finance is something you must pay attention to. The reason is because financial problems tend to cause problems in other areas of life. If you get your personal finance in order, you will greatly reduce the possibility of having problems in other areas of your life.

One part of personal finance I’d like to discuss here is retirement planning. You need to prepare for your retirement. Since you no longer have your main source of income at that time, it’s essential that you are financially prepared for it. Continue reading ‘Three Reasons Why 401k is Good For Your Personal Finance’ »

If you are living and working in the United States, you are definitely fortunate because you are capable of saving for your retirement and at the same time defer present income taxes on your saved funds and earnings until such time that you can carry out distributions or withdrawals. You can choose to place a portion of your wage or income to be directly paid or deferred into a 401k account, which is recognized as a contribution.

In actual fact, this retirement investing option is an employer-sponsored account. Your employer or company has the full discretion to grant you benefits as their employee by optionally selecting to match up part or all of your contribution by means of making additional contributions in your account or grant you with profit sharing benefits in your retirement account. Continue reading ‘401k Account – Are You Eligible?’ »

Most employees in the United States have the benefit of having their retirement fund put up in a structured fund held for them by their employers. In the 401k provision of the tax code, employers are mandated to set up a 401k program wherein their workers are allowed to save up a portion of their income in their 401k account so that they can successfully accumulate funds for their retirement. These 401k programs work by allowing the employees to invest in various instruments to grow their retirement fund. In other companies, there is a matching employer contribution to what the employee elects to contribute to his 401k account. Such contributions are not done on a pre-tax basis wherein income taxes are not deducted on the year the contributions are made. Taxes are deffered on the contributed money as well as its earnings upon withdrawal of the retierment fund in later years.

The Internal Revenue Code’s 401k provision stipulates certain limitations to the amount that an employee can contribute to his 401k account. The total 401k contribution limits apply to the matching contribution of the employers as well. Generally, the total amount of contribution should not exceed the total amount of compensation that the employee receives. 401k contribution limits increase every year starting with $45,000 in 2007, to $46,000 and $49,000 in the years 2008 and 2009 respectively. After year 2009, the limits on total contributions to 401k accounts shall increase in increments of $1,000 based on the inflation index. Excess contributions of an employee to a 401k account will result in the employer being slapped with penalties from the violation of the tax code. These excess contributions will be tagged “non-qualified” and cannot be held in the 401k retirement account. Continue reading ‘401k Contribution Limits – How Much Can You Put Into Your 401k?’ »

When you have the discipline to set up a savings instrument early in your life, you are likely to successfully accumulate money enough to last you through your retirement years. It is the person you are today, capable of earning money and making decisions as to the use of that money, who can best prepare for life in later years. Such is the principle behind the setting up of 401k plans. Employers and employees in the United States have the benefit of being able to set up a savings instrument in the 401k retirement plan to be able to accumulate enough money that they can use when they retire. While the money that is contributed to the 401k retirement plan, including the employer’s matching contribution, is automatically vested in the name of the participating employee, the funds are not readily available for unsubstantiated withdrawals. There are 401k withdrawal rules that need to be followed.

Generally, the only kind of withdrawal that is allowed in the 401k program is the 401k hardship withdrawal. This means that the reason for your need for the additional money should be because of some kind of financial emergency such as the death of a family member, illness in the family, mortgage refinancing, and property repairs for calamity damage among others. Making a withdrawal from your 401k account for any one of these hardship reasons would bar you from being able to make contributions to your 401k account for at least 6 months. Continue reading ‘401k Withdrawal Rules – Reaping the Rewards of Saving’ »

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A three part series by Bloomberg TV originally aired on 6/19/2008 reveals “The Truth Behind Hidden Fees in 401k Plans.”

According to a survey conducted in 2007, 8 out of 10 people who have 401k accounts are completely unaware of the management costs for their 401k fees. The fees are buried in fine print and so confusing they may as well be in a foreign language.

The U.S. Department of Labor says that plan managers can have as many as 17 different kinds of fees charged to your plan. Have you ever heard of Wrap fees, Revenue Sharing, Surrender Charges, finder fees, 12B-1 fees, Soft Dollars, and Shelf Space fees? Continue reading ‘401k – Fees Or Fears?’ »