Published
on: February 2nd, 2007Contributions
towards an employer sponsored 401k retirement plan are made in before-tax
dollars. This means your current taxable income for the year is
reduced by the total amount of contribution you have made. For example,
you might be single and earn $50,000 this fiscal year. However,
if you make a $4000 contribution towards a 401k retirement plan
this year, your current taxable income for the year will be reduced
to $50,000 - $4000 = $46,000. (Read
Full)
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Published
on: January 28th, 2007If you
quit your current employer while your 401k balance is less than
$5000, you should roll it over to an IRA or your new employer's
401k administered plan. This is because the old employer will not
allow you to keep a balance of less than $5000 in his 401k plan.
If you quit your employer with a balance of less than $5000, here
are the steps to follow: (Read Full)
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Published
on: January 23rd, 2007Rather
than receiving a monthly check upon retirement (annuity payments),
many people think of taking out a lump sum distribution (a one time
distribution) of their retirement assets. If you do decide to take
out a lump sum distribution of your 401k assets, consider the Pension
Protection Act of 2006 which could severely reduce the amount of
money you actually withdraw from your lump sum payment. (Read
Full)
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Published
on: January 17th, 2007A survey
conducted by the Profit Sharing/401k Council of America in Chicago
reports that more and more US employers are shortening the length
of time it takes for their employees to be eligible to contribute
towards 401k retirement plans. About 427 401k retirement plans were
surveyed and the reports showed 69% of them permit employees to
contribute towards 401k retirement plans within 3 months of hire
date. This is a 4% increase from the last year, that showed only
65%. (Read Full)
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 Published
on: January 16th, 2007The Tax Increase Prevention &
Reconciliation Act (TIPRA) of 2005 was signed into law by President
Bush on May 17, 2006. TIPRA includes a provision that facilitates
the conversion of Traditional IRAs to Roth IRAs. If you read the
article on Roth IRA Rules, you
will know that if your Modified Adjusted Gross Income (MAGI) exceeds
$100,000, you are NOT eligible for a Roth IRA conversion. Why
would you want to do a Roth IRA conversion? Tax-deferred growth
of earnings, tax-free distributions and no minimum required distributions
(RMD) are some of the reasons. (Read
Full)
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Published
on: January 7th, 2007Throughout your working years,
you have built up a huge nest egg of retirement savings, probably
a joint account with your spouse. However, what happens to this
401k plan if you go through a divorce? If you undergo a divorce,
your spouse and any dependents are eligible for a share of your
401k retirement savings. The court settling your divorce will
issue a statement called Qualified Domestic Relations Order (QDRO)
that will clearly state how much of your 401k nest egg will be
given out, when it will be paid out and how the division of retirement
assets will occur. (Read
Full)
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Published
on: December 19th, 2006The retirement provisions included
in the Economic Growth and Tax Relief
Reconciliation Act of 2001 are summarized below:
- Deferral limits of 401k, 403b
and 457 retirement plans increased to $11000 for the year 2002,
then increasing $1000 per year upto $15000 in 2006. After this,
the deferral limits will inrease by $500 a year.
- SIMPLE IRA limits increased $1000
per year starting 2002, up until $10,000 in 2005. This limit
will be reduced to $500 a year after 2010. (Read
Full)
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Published
on: December 17th, 2006
Many Corporations have learned from
the fraud cases of Enron and WorldCom that they have to minimize
their risk when most of their employees' retirement savings are
invested in company stock. What happens when the stock takes a
deep plunge and employees lose a big chunk of their retirement
savings? Million dollar lawsuits!
(Read
Full)
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Published
on: December 13th, 2006
Tree of Life (see company description below) has appointed
the New York Life Investment Management LLC (NYLIM) firm to administer
and manage its $100 million nest egg 401k plan and provide bundled
services. Operating in St. Augustine, Florida, USA, Tree of Life
is a world known distributor of organic and natural food products.
(Read
Full)
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Published
on: December 8th, 2006
A study conducted by Investment Company Institute concluded
that the combined total value of US mutual funds has surpassed
the $10 trillion mark. The size of the mutual fund investments
has increased by $286 billion, up 2.9% from last September. The
largest amount of growth was seen by stock funds, growing up to
$5.67 trillion, up 3.8% from last September. (Read
Full)
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Published
on: December 8th, 2006
In a recent 401k survey conducted by the New York Life Investment
Management LLC (NYLIM), many 401k participants agreed that they
are making the correct investment decisions when it comes to investing
their retirement savings, but still worry that they will not have
enough money to survive on upon retirement. The survey had a sample
population of 8,958 401k participants and 60% of them acknowledge
that they are making the right investment decisions. However,
only 40% out of all 401k participants are certain that they will
not run out of money upon retirement. (Read
Full)
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Published
on: December 1st, 2006In
the year 2004, the average household savings in USA averaged 0.8%
of disposable income (income after all your expenses have been
paid off). This rate has been the lowest since the Great Depression
and the past 3 decades have seen savings rates of over 7%. Why
is this 0.8% rate so low? Is it because Americans are just bad
at saving money, or too much of our disposable income is going
towards paying off our homes? In order to reach your goal of having
$1 million upon retirement, here are a few suggestions:
(Read Full)
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Published
on: December 1st, 2006Starting
December 30th, 2005, the US Treasury Department issued and confirmed
the Roth 401k Rules for 401k retirement plan savers. These Rules
come into effect starting January 3rd, 2006 and we will look indepth
at some of these Roth 401k rules.
Roth 401k Retirement assets (cash, mutual fund investments,
etc) can be rolled over to other Roth 401(k)s, Roth 403(b)s, and
Roth IRA(s). These rollovers can be done via Direct
401k Rollovers. (Read
Full)
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Published
on: November 22nd, 2006If
you have a spouse and are married, your federal tax rate could
actually be lower than that of a bachelor working full time. This
is because the US Tax System favours married couples more than
unmarried individuals when it comes to taxation and retirement
401k plans. This article will summarize some of the extra benefits
available to married couples when it comes to 401k retirement
plans.(Read
Full)
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Published
on: November 18th, 2006A
study conducted by the Investment Company Institute found that
401k Retirement Plans
are the #1 Retirement Saving Investments made by working people
in the USA. This study comes at a time when 401k plans are turning
25 years old (the official birthday of 401k plans is on November
10, 2006). 401k Retirement Plans now have 47 million active participants,
which is more than double the size of Private Defined Benefit
Plans that have about 21 million active participants. 401k Plans
currently hold $2.4 trillion in retirement assets (liquid cash
and investments) while private defined benefit & pension plans
hold $1.9 trillion. (Read
Full)
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Published
on: November 17th, 2006On Nov 6th, 2006,
Financial Engines announced that 401k
retirement savers have given the company over $7 Billion in 401k
retirement assets, up $1 billion from the last month. Thanks to
the Pension Protection
Act of 2006, more companies are encouraging their employees
to sign up for 401k retirement plans via automatic setups. Executive
VP of Financial Engines, Larry Raffone quotes, "As more large
companies wind down their defined benefit plans, many seek to
deliver greater value through their 401k plans, and managed accounts
fit well within that strategy..." (Read
Full)
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Published
on: November 3rd, 2006The Pension Protection
Act of 2006 became law on August 17th, 2006 and is the biggest
pension and retirement reform brought about since the Employee
Retirement Income Security Act of 1974 (ERISA). Apart from affecting
Pension Plans, the Pension Protection Act of 2006 has various
effects on Individual Retirement Account (IRAs) as well as Defined
Contribution Plans.
(Read Full)
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Published
on: October 26th, 2006The IRS (Internal
Revenue Service) announced on October 18th, 2006 the cost of living
adjustments to pension and 401k retirement plans for the upcoming
tax year of 2007. These adjustments are carried out by the Commisioner
under Section 415 of the Internal Revenue Code. The 401k max contributions
for the tax year 2007 and previous years is detailed below:
Note: The max 401k contribution for the year
2007 is $15,500 which is up $500 from the year 2006. (Read
Full)
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Published
on: October
25th , 2006
If you withdraw money prematurely from your IRA (if you
are less than 59.5 years of age), this is known as an Early IRA
Distribution. You will be assessed a 10% early distribution penalty
on this withdrawal (on the gross amount). The IRS however does
allow you to withdraw money prematurely from your IRA on special
circumstances. For more on this, see Withdrawing
Penalty Free Distributions from your IRA (Individual Retirement
Account) If you fall under any of these cirumstances,
be sure to have your IRA custodian or administrator sign and initial
your Distribution Report. (Read Full)
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Published
on: October
20th , 2006
The following table shows the yearly contribution limits
that an employee can make towards both his Simple IRA and Simple
401k account. On top of the normal contributions, employers are
allowed to make Employer-Matched Contributions of upto 3% of the
Employee's Compensation. For example, if an employee makes $50,000
a year, the employer is allowed to make an extra $1500 (3% x $50,000)
contributions on behalf of the employee.
(Read Full)
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Published
on: October
19th , 2006
Defined Benefit Pension Plans are the traditional pension
plans where both you and your employer withhold a certain amount
of your gross wage, manage it until retirement and this guarantees
you a specified monthly income for life, upon your official retirement.
The total monthly payment you will receive depends on how long
you have worked, and how big your pension nest egg is.
(Read Full)
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Published
on: October
14th , 2006
Contributions towards your Roth IRA account do NOT have
to be made in the form of a lump sum payment. For example in the
year 2008, you could contribute $5000 / 12 months = $417 per month
for 12 months. Or you could contribute $5000 / 4 = $1250 every
3 months. Or you could contribute $2500 every 6 months. You get
the idea? (Read Full)
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