You Should Learn The Basics Of A 401K Account
Many companies have switched to 401k accounts for their employees' retirement plans instead of the traditional pension. This is often beneficial to the employee because the investment is handled by an outside investment company. Because of that, unless the employee invests in the stock of the company he works for, the chances of losing one's retirement income when an employer goes out of business is minimized. This article will help you understand the basics of a 401k account.
401k plans are a tax-deferred retirement savings plan. They are administered by a third party investment company, not directly through your employer. The tax advantages are that you don't have to pay taxes on the money you put into the account until you take it out. Most people fall into a lower tax bracket once they retire, so this could potentially save you a lot of money in taxes.
There are limits on how much you can contribute to a 401k. For people who make under $110, 000 annually, the contribution limit is $16, 500 for an individual and $49, 000 including the employer match. If you are 50 years old or older, the limits are increased to $22, 000 and $54, 500. For employees who make over $110, 000 per year, there are special rules that may result in your employer lowering your limit.
Employers have the option of matching employee contributions to a 401k plan. Not all employers offer this, but many do. Employer matching can be full or partial. Either way, there is usually some sort of limit on it. Employer matching is like free money, so if your employer matches you should try to contribute enough to get the maximum match amount if you can.
The funds in your 401k plan might not be fully vested immediately. This means that there might be a waiting period before the money is really considered yours. You can choose how the money in your 401k is invested, but you are limited to the options that your company makes available to you.
Some companies allow you to borrow against your 401k plan. When you take advantage of these loans, you usually get a pretty good interest rate. As you pay the loan back, you are paying yourself interest. It's best to proceed with caution when considering borrowing money against your 401k. If you quit or are fired from your job, you will have to pay the entire outstanding balance quickly or you will be penalized.
Since many companies now opt for 401k plans instead of traditional pensions, it's a good idea to get an idea of how they work. That way you can make an informed decision about whether to invest in your company's plan. - 23208
401k plans are a tax-deferred retirement savings plan. They are administered by a third party investment company, not directly through your employer. The tax advantages are that you don't have to pay taxes on the money you put into the account until you take it out. Most people fall into a lower tax bracket once they retire, so this could potentially save you a lot of money in taxes.
There are limits on how much you can contribute to a 401k. For people who make under $110, 000 annually, the contribution limit is $16, 500 for an individual and $49, 000 including the employer match. If you are 50 years old or older, the limits are increased to $22, 000 and $54, 500. For employees who make over $110, 000 per year, there are special rules that may result in your employer lowering your limit.
Employers have the option of matching employee contributions to a 401k plan. Not all employers offer this, but many do. Employer matching can be full or partial. Either way, there is usually some sort of limit on it. Employer matching is like free money, so if your employer matches you should try to contribute enough to get the maximum match amount if you can.
The funds in your 401k plan might not be fully vested immediately. This means that there might be a waiting period before the money is really considered yours. You can choose how the money in your 401k is invested, but you are limited to the options that your company makes available to you.
Some companies allow you to borrow against your 401k plan. When you take advantage of these loans, you usually get a pretty good interest rate. As you pay the loan back, you are paying yourself interest. It's best to proceed with caution when considering borrowing money against your 401k. If you quit or are fired from your job, you will have to pay the entire outstanding balance quickly or you will be penalized.
Since many companies now opt for 401k plans instead of traditional pensions, it's a good idea to get an idea of how they work. That way you can make an informed decision about whether to invest in your company's plan. - 23208
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posted by X - Men @ 7:15 AM
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