What Is A 401(k) Plan?
The 401(k) retirement plan is funded by employee contribution and a matching employer contribution. The major feature of the plan is that the contributions are taken from pre-taxed salary. The fund accumulates tax-free until it is withdrawn. Most businesses and tax-exempt organizations can create these retirement plans.
The 401(k) takes its name from the IRC (Internal Revenue Code) of 1978. The operation of the 401(k) is administered by the EBSA (Employee Benefits Security Administration) of the Department of Labor.
The 401(k) plan has a lot of advantages. First and foremost is that the employee can contribute pre-tax money that reduces the tax paid in each paycheck. Also, the company contribution and any growth in the fund is free of tax until withdrawn.
The compounding of the fund during a 20 to 30 year period is quite amazing. The employee has a lot of control in the direction of the future contributions. When the company matches your contributions, it adds something extra on top of your own money. All money in the plan can be moved from one company to another unlike pension.
The 401(k) plan is protected by pension laws since it is a personal investment plan. It includes protection from garnishment by creditors but not from domestic cases that include child support.
There are some disadvantages in the 401(k) plan, it is hard to get your 401(k) contributions before age 60 (59 1/2 to be exact). The 401(k) is not insured by the PBGC (Pension Benefit Guaranty Corp). Also, the company contributions do not kick in until a certain number of years of service have been given. The rules state that company matching contributions must either be a 3 year 'cliff' plan (100 percent after 3 years) or a 6-year 'graded' plan.
Employees participating in a 401(k) plan have many options for investment. In most cases a listing of mutual funds. The mutual funds usually include money market fund, treasuries, stock funds and bond funds. Some plans may include investing in company stock and US Savings Bonds. The employee gets to choose how the savings is invested. The employee can also choose at any time to stop contributions.
Financial advisers usually say that the average 401(k) contributor is non-aggressive in terms of their investment options. Stocks have historically outperformed other types of investment, since the 401(k) is a long term investment it should be able to minimize the stock fluctuations.
More Articles
Financial Planning For A Worry-Free Retirement
Consulting Services For Retirement Planning
How To Get Started With Retirement Funds
Celebrating Your Golden Years With Your Family
Retirement Benefits You Should Know
You Should Be Preparing For Retirement
Where To Retire When Looking For Retirement Paradise
Products And Downloads
Free Videos
More Articles And News
How To Get Started With Retirement Funds
... meet the expenses underlying in retirement age. You can also make a research on investments and other sources of income that will help you in raising your funds. Never forget to take everything easily. Retirement funds may seem a difficult subject for every person entering retirement age. If you start ...
The Advantages Of Using A Retirement Calculator
... retirement calculators, most people will be able to calculate the yearly investment needed in order to arrive at a particular amount of retirement money. However, there are other factors that need to be considered before computing the amount of savings. These factors directly affect the results of the ...
... contributor s death. However, in retirement annuity, your annual contributions (annuity) are meant to give you more financial protection throughout your retirement period. It secures you more of financial loss in cases of bankruptcy and financial loss through lifestyle or business venture. How Does it ...
... Note the basic expenses you will continue to shell out regularly after retirement. Note also the probable expenses that might come up once you retire, like taxes and insurance for example. List needed or desired purchases that would come up by that time, like a vacation house. Knowing these probable costs ...
Financial Planning For A Worry-Free Retirement
... and knowledgeable in all kinds of financial planning and they can provide the most feasible and workable approach for your individual needs. 3. Get rid of loans, debts, and other financial obligations in as little time as possible. By simply paying off all debts, loans, and other financial obligations ...
 NECN | Web will help agency deal with flood of retirement applications Baltimore Sun, United States - Yesterday, the Social Security Administration announced that people who reach retirement age, as early as 62, can go to the federal agency's Web site and ... New Age of Retirement: Applying Online Patty Duke, 62, Will Wait to Claim Social Security Recession's Mixed Effects On Baby Boomer Retirement Plans |
No 'crisis' but ND pension funds take beating Forbes, NY - Sparb Collins, director of the North Dakota Public Employees Retirement System, said legislators may want to consider whether to increase the state's ... ND LEGISLATIVE NOTEBOOK: State pension funds take a hit, House ... |
Big Slide in 401(k)s Spurs Calls for Change Wall Street Journal - By ELEANOR LAISE The stock-market rout has ignited a crisis of confidence for millions of Americans who manage their own retirement savings through 401(k) ... After market drubbing, 401(k) reconsidered |
 The National Spending Journal | Beneficiary Designations Advised for All Retirement Accounts NuWire Investor, WA - One financial planning chore that’s easy to overlook is naming a beneficiary for retirement accounts. This is an important area for everyone who invests ... Resist the excuses: Contribute to your IRA You Can Still Grow Your 2008 Nest Egg |
Haywood County Sheriff Announces Retirement WLOS, NC - Haywood County Sheriff Tom Alexander says he's stepping down, effective February 2nd, after 22 years as the county's top cop. He says it's past time for him ... Haywood sheriff to retire next month Haywood County Sheriff Announces Retirement Haywood sheriff to retire |
More Workers Rolling over Retirement Savings at Job Change Planadviser.com, CT - More workers are rolling over retirement assets when they change jobs than in past years, according to a study by the Employee Benefit Research Institute ... 44% roll lump sums into tax-qualified plans |
Retirement benefits may cost Appleton school district $107 million Appleton Post Crescent, USA - The district has always paid retirement benefits, but seeing the projected ongoing long-term liability laid out in black and white had a sobering effect. ... |
San Bernardino County Sheriff Penrod announces retirement Press-Enterprise, CA - With no financial incentive to put off retirement, the 60-year-old Yucaipa resident said it's time to enjoy his toys -- a 2003 Harley Davidson with only ... Sheriff Penrod plans retirement Retiring Sheriff Penrod recommends assistant sheriff get the job Sheriff Penrod to retire |
US: Cheney Expects Total Retirement From Public Life Sin Chew Jit Poh, Malaysia - Cheney, who turns 68 on January 30, said he has plenty of projects to keep him busy in his political retirement, including possibly writing a book. ... |
 The Age | Matt Hayden says he won't be bulldozed into retirement Courier Mail, Australia - By Ben Dorries STRUGGLING Test opening batsman Matthew Hayden has vowed he will not be bulldozed into retirement, but the decision appears to have been made ... No retirement signs from Hayden: Hussey Hayden continues to dismiss talk of retirement Hayden weighs up retirement |