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.

Section 401 (k) of the Internal Revenue Code states that employees are not required to pay income taxes on what is referred to as “deferred” compensation. That is why the company that you work for can make a contribution, in your name, into your 401-k retirement plan, without increasing your taxable income for the year.

Section 401 (k) was added to the Code in 1978 and went into effect in January of 1980. Of all of the plans, it has been around the longest, nearly completely taking the place of company sponsored pension plans.

You see, there are “no” disadvantages of 401 k plans, as compared to old fashioned pension plans, at least from the company’s perspective. Since, you’ll probably never have the option of choosing a standard pension plan, there’s no reason to look at the advantage/disadvantage of one of those plans.

But, you could be offered the option of a Roth-401k, if the company has amended the plan to include that option. Most people feel that the Roth account is a better option, but not everyone feels that way.

The biggest advantage of Roth plans is that qualified distributions are never taxed and earnings from investments made within the account are never taxed. Some people say that the benefit may never be realized, if the account owner dies before retirement. While that’s true, any of us could die before retirement age. Does that mean that we shouldn’t save for retirement?

If you are going to say that dying young is one of the disadvantages of 401 k Roth plans, then you would have to say that you may as well spend all of your money, today. I like this saying: live in the moment, but plan for the future. If you don’t, you could end up a burden to your children or society. No one wants that.

There are no other “real” disadvantages of 401 k Roth plans. There are some perceived draw-backs, in that contributions to the Roth plans are taxed as regular income. Contributions to the standard plans reduce your income for the year, thus “possibly” lowering your taxes.

The main thing to be sure of, regardless of what retirement plan you choose, is that the investments made from within the account are fully diversified, not restricted to stocks, alone.

Some investment types, such as real estate, have higher earning potentials than others. There are disadvantages of 401 k plans that are not fully diversified. But, that’s the subject of another article.

To get started on accomplishing your retirement goals, choose a real estate turnkey company to invest your self-directed IRA money in real estate.

This is the best investment strategy considering today’s economic environment for building a secure financial future.

Isn’t your financial future worth it?

Ed Gosselin researches retirement investment strategies while advocating IRA real estate turnkey solutions as a means of diversifying your portfolio while maximizing your returns.

Learn more about retirement investment strategies to accomplish your financial goals, by visiting his website http://higher-ira-returns.com.

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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.

One of the disadvantages of 401k plan and traditional IRA usage for some people is that they continue to pay income taxes, after retirement. The wealthier you are after retirement, the more advantageous the Roth plans.

Do you want to begin taking distributions by the age of 70 ½?

People are working longer and living longer. They are healthier and more active. It is not unusual today to see people working past the age of 70.

One of the disadvantages of 401k plan and traditional IRAs is that account holders must begin taking regular distributions by the age of 70 ½. If they are still working, the distributions add to their annual income.

So, they often pay more taxes than they want to. If they don’t really “need” the money, they have to decide what to do with it; put it in a savings account, find another investment, etc.

There’s really no way to know how you will feel at the age of 70, but with Roth plans, there are no required distributions. You can save it for later life or leave it to your beneficiaries.

How much do you want to contribute on an annual basis?

There are maximum annual contributions to any tax-advantaged retirement account, regardless of the type. But, the maximum annual contributions to 401Ks are higher than the maxes for traditional accounts.

There is now a Roth-401k and a Roth-IRA, but the maximum annual contributions are the same, whether the account is a Roth or a traditional type.

Any disadvantages of 401k plan usage may be outweighed by the higher maximum annual contribution and the employer matched contributions. If your earnings are high and you want to save more, 401ks are the way to go.

Does your account provider limit your investment choices?

Now, that you have learned about the advantages and disadvantages of 401k plan usage, you might want to investigate all of your investment options.

Some account providers limit the types of things that you can invest in.

With today’s markets, the average number of years that people are living after retirement and the inflation rate, you cannot afford those limits.

To get started on accomplishing your retirement goals, choose a real estate turnkey company to invest your self-directed IRA money in real estate.

This is the best investment strategy considering today’s economic environment for building a secure financial future.

Isn’t your financial future worth it?

Ed Gosselin researches retirement investment strategies while advocating IRA real estate turnkey solutions as a means of diversifying your portfolio while maximizing your returns.

Learn more about retirement investment strategies to accomplish your financial goals, by visiting his website http://higher-ira-returns.com.

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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.

#2. You take more than one roll-over in a 12 month period.

That does not mean more than once per calendar year. That means more than once during “any” 12 month period. I am personally familiar with an investor that rolled over his account, found himself happy with the results, but then found another investment with higher returns. He initiated another roll over 11 months after the first.

That is one of the 5 biggest 401k rollover mistakes, because the funds must be included with your income for that year.

In other words, you pay more taxes.

#3. You choose to take a roll-over instead of a transfer.

A transfer and a rollover are different transaction types. For people that have already decided on a new account provider, one of the 5 biggest 401k rollover mistakes is simply to take a rollover, instead of making a transfer.

When you are not the “middleman”, the first two mistakes cannot happen.

#4. You put the funds into a Roth, instead of a traditional account.

This is only a mistake if you are aware that you will need to include the account value in your annual income tax return. Contributions to a regular 401K are not taxed as regular income for that year.

Contributions to a Roth are, but qualified distributions from within a Roth are never taxed. Learn the rules, before you consider going from a traditional account to a Roth.

#5. You fail to consider all of your investment options.

Failing to consider all of your investment options, which could include self-directing into real estate, may be the biggest of the 5 biggest 401k rollover mistakes.

If your account is not earning 12% per year or more, then you might want to try something different.

To get started on accomplishing your retirement goals, choose a real estate turnkey company to invest your self-directed IRA money in real estate.

This is the best investment strategy considering today’s economic environment for building a secure financial future.

Isn’t your financial future worth it?

Ed Gosselin researches retirement investment strategies while advocating IRA real estate turnkey solutions as a means of diversifying your portfolio while maximizing your returns.

Learn more about retirement investment strategies to accomplish your financial goals, by visiting his website http://higher-ira-returns.com

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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.

This is not necessarily your personal limit because there is also a maximum contribution level set by the government. Your limit will be the lower amount between your employer’s allowance and that set by the government. The government rate is really a guideline for those that make well over $100,000, as it is usually set quite high.

As far as the 2009 401k limits, the IRS has determined that no one can contribute more than $16,500.

For our example, since the employer’s limit is lower, that would be your contribution maximum for all of your 401k plans for the year. The government set limit would not apply to you.

Also, there is something called a “catch up contribution” for anyone over the age of 50. This allows for an extra $5,500 over the course of the year. This is as of the latest 2009 401k limits. Again, this is collective over all of the 401k plans held.

The 401k contribution limits change every year and are a reflection on the changing cost of living in the country. It is important to check each year to determine how much you are allowed to contribute and how you wish to split up the total amongst all of your 401k investment plans.

When it comes to your 401k plan there are a number restrictions and rules in place. One such rule is the contribution limits. You may check the site for the most recent 2009 401k Limits, as well as other retirement accounts like the IRA.

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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.

You have to find out this amount from your employer, but it is not necessarily going to be your personal maximum contribution. The IRS also sets a maximum contribution which no one in the country can exceed. This is just one number that applies to everyone, but it is aimed more at those who make in excess of $100, 000.

The IRS 401k rules mandated 401k contribution limits for the current year at $16,500.

In our example above, the $4,500 set by the employer is lower than the IRS mandated number. This would mean the IRS number does not apply and the employer’s limit must be followed.

If you are over the age of 50, you also have the option of participating in an optional catch up contribution. This allows you to contribute up to $5,500 extra since you are closer to retirement age. Once again, this amount has to be reached collectively across all of your 401k and Roth 401k accounts.

The current year’s 401k contribution limits are a direct reflection on the standard cost of living in the country. This rate changes every year, so it is important to keep up with it to ensure you are contributing the right amount to all of your accounts.

You’ll want to make sure you don’t exceed the 401k contribution limits when making your contributions. Similarly, when it comes to the 401k rules there are certain things set in place, so always consult a qualified advisory before making a major move.

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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.

Fortunately, there are good programs that can help you prepare for your retirement and one of them is 401k. 401k is a retirement plan offered by many employers across the country and there are three reasons why it is good for your personal finance.

First, the plan is set up in such a way that discourages you to withdraw the fund before your retirement. You will get costly penalties if you do that. This helps you overcome the temptation of using the fund for something other than your retirement.

Second, many employers offer employer match for your contribution up to a certain amount. For example, if you contribute $500 to your account, your employer may give you another $500 and you will end up having $1000 added to your account. This is something you can’t get with other investment options and that’s why you need to maximize your 401k contribution. Make sure that you contribute up to the limit of your employer match. This way you get all the “bonus” that you can get.

Third, your 401k contribution is not taxed. You will only be taxed at the time of your withdrawal. It means that you will have more money to invest in your account. Because of the compounding effect, this extra money will end up making you a lot more in the long term.

Alex is a writer who writes about personal finance. Visit his site on 401k rollover.

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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.

If you want to personally choose the type of investments for your account, you may want to consider a participant-directed plan, which will allow you to select from an assortment of investment vehicles such as mutual funds, money market investments, stocks, bonds and even other non-conventional assets. You may also find your company offering the opportunity to buy stocks from their corporation. You have all the right to transfer your money among the allowed investments any time.

Keep in mind that a 401k account is tax deferred – meaning all of the contributions you will make will be carried out on a pre-tax basis or no income tax will be withheld on your income in the year it was added to your account. Your contributions and any capital gains, growth or interest in them will only be taxed when you withdraw the money.

Generally, private sector corporations sponsor this retirement plan to their employees. That’s why your employer is in charge of creating and formulating your retirement plan. Under the Internal Revenue Service’s (IRS) definition, this account is a form of defined contribution. In other words, it is a salary reduction retirement savings option, where you should choose a portion or percentage of your salary to be added to your plan while your account reflects the scope of your employer matching.

You may be afraid that you will not obtain the full value of your retirement account once your employer enters bankruptcy phase. During this situation, you should feel relieved that 401k plans are secured and protected due to the policy that delineates your right as an employee to get hold of all of your contributions, wherein your contributions must accumulate to your sole advantage.

If you decide to leave your current job, your retirement account can stay active with your previous employer, but you should make sure that you’ll withdraw your funds starting the 1st of April when you reach 70 ½ years of age.

Like any other opportunities, there is a setback when having a 401k account as your exclusive retirement savings plan. One of which is that the contributions you make are not becoming diversified, especially if you invest your funds in the company you’re working for. Due to this, the rates of return of your retirement plan will remain mediocre for the rest of your life.

For more information about 401k Accounts, please visit: http://www.retirement-planning-center.com/401k.

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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.

Employees who are highly paid are also bound by 401k contribution limits. Furthermore, to ensure that majority of employees benefit from this program, there is a limit to how much of the highly paid employees can contribute to the total group contribution of the entire company. Highly compensated employees (HCEs) are defined as those who are earning annual incomes of $100,000 in 2007. Some companies also define these HCEs as the top 20% of their employee force ranked based on the amount of wages they receive. Those who hold at least 5% ownership in the company are also classified as HCEs. No more than 2% of the annual deferral percentage should come from these HCEs lest they be disqualified from participating in the program.

Also among the 401k contribution limits are provisions for those who are advanced in age who would like to make catch-up contributions to their 401k accounts. Employees who are 50 years of age or older could make additional contributions of $5,000 in the year 2008. This year, the catch-up contribution limit for these older employees were upped to $5,500. These limits are on top of the regular contribution limits for all 401k program participants which are pegged at $15,500 from year 2007 to 2008. This year, the contribution limit was increased to $16,500.

Learn more about 401k contribution limits, please visit http://www.401kcontributionlimits101.com

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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.

As in most other instruments that you withdraw from earlier than stipulated in the contract, the 401k withdrawal rules state that there are penalties to these withdrawals. However, the Economic Growth and Tax Relief Reconciliation Act which was enacted in 2001 specifically states that any withdrawal from a 401k account before the participating employee reaches the age of 59 ½ should be charged with a penalty fee of 10% . Other taxes like income tax earned by the investment, local taxes, and state taxes are also to be charged to the account. Those who families of employees who pass away, those participating employees who become permanently and totally disabled, and those who become separated from the company during or after the year the employee turns 55 are not subjected to the 10% penalty.

One way to go around this 10% penalty is to take out a loan from the 401k account. Most companies allow their employees to have this kind of facility in their 401 account. The loan on the 401k is not a subject to tax nor to the 10% penalty. The loan should, however, be paid back within 5 years in equal quarterly payments until the end of the loan tenor. Section 72(p) of the US Internal Revenue Code governs these kinds of 401k loans but the employers are also given the liberty to restrict such 401k loans to protect their entire portfolio. Getting a 401k loan is subject to a predetermined reasonable interest rate. Such a loan does not impact the status of the 401k account nor does it prevent an employee from making further contributions to his 401k account.

Learn more about 401k Withdrawal Rules, by visiting http://www.a401kwithdrawalrules.com

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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?

These are just a few of the many terms used to levy fees against 401k retirement plans for brokerage or management costs. What you don’t know can hurt you.

The money saved in a 401k account should compound over the years to make a comfortable nest egg for retirement. How much of this is offset by management and brokerage fees? Most of us don’t seem to know, but according to Ted Benna of Malvern Benefits Corporation “401k fees at 2% over a period of time can erode as much as half a person’s savings.”

Edward Siedel- SEC Investment Management Division tells us that excessive 401k fees have become “epidemic”. He has seen fees in excess of 3%-5% and tells us that fees this high can “kill a retirement nest egg!”

SEC Chairman Cox says that “unless 401k balances climb a lot higher, more and more Americans will be forced to work in their Golden Years to make ends meet.” As he put it, “pension plans are going the way of the 8 track tape”.

With about 3 trillion dollars in 401k investment plans, Americans should take notice and ask questions. Burton G. Malkiel PhD of Princeton University tells us that financial institutions and insurance companies aren’t obligated to disclose management fees and often when they do, it’s done in such an obscure way that it is very difficult to understand.

What can you do about it? Unless laws governing disclosure rates change in the near future, there is not much you can do except ask. You can be aware of the fact that 401k fees could make the difference between eating cat food or cordon blue in your retirement years.

One thing to consider is to not put all your eggs in one basket. Think about starting a small online business by building a blog and doing the necessary things over time to draw traffic to your site. Pick something that you have experience and an interest in. In this way you can make a niche and grow your small business over time.

Building a small business online can be enjoyable and will offer the standard tax advantages for the costs associated with supporting this business at home. The actual start up costs can be minimal and you can build your blog or online business at your own pace.

Ask your broker about your 401k fees. Don’t put all your nest eggs in one basket. Having a 401k, with social security and a small business can help you hedge your bet against receding assets in what should be your “Golden Years”.

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