Welcome to Research401k.com - A Complete
Resource On Important 401k Retirement Plan Topics such as 401k
Rollovers, Roth IRA Accounts, 401k Contribution Limits, Hardship
Withdrawals, Self-Employed 401k and more!
- IRS Announces Max 401k Contribution Limits for 2019
Can You Contribute Too Much to Your 401k?
While many investment advisers recommend that all workers contribute at least 10 percent of their paycheck to a 401k plan, it is possible to invest too much in the plan. If contributing to your 401k plan interferes with your ability to build an emergency fund or meet your regular obligations, you might want to scale back the percentage you put in, at least temporarily.
(Read Full)
IRS
Announces Max 401k Contribution Limits for 2019
The IRS (Internal
Revenue Service) announced the cost of living
adjustments to pension and 401k retirement plans for the upcoming
tax year of 2019. These adjustments are carried out by the Commisioner
under Section 415 of the Internal Revenue Code. The 401k max contributions
for the tax year 2019 and previous years is detailed below:
Note: The max 401k contribution for the year
2019 is $19,000. (Read
Full)
Using Your 401(k) Balance to Finance a New Business - Some Things to Consider
While starting your own business can be an excellent way to secure your financial future, finding the cash you need to get that startup off the ground can be very difficult. One possible solution is to use the funds in your 401(k) plan, but you need to tread cautiously and examine the options before proceeding. (Read
Full)
Advantages
of Making Salary Deferral 401k Contributions
Contributions
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)
5
Characteristics of Your 401k If 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)
Effects
of the Pension Protection Act of 2006 on Lump Sum 401k Distributions
Rather
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)
Tax
Increase Prevention & Reconciliation Act of 2005 and 401k
Retirement Plans The 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)
What
Happens to your 401k when you are Divorced? Throughout 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)
Risks
of Investing 401k Retirement Plan Savings in Company Stock and
how to Minimize that Risk 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!
Case in Point:
In
2006, 16% of all Firms will either totally eliminate Company
Stock as an investment option, or limit employees' stock
purchases as part of their 401k Retirement Savings portfolios.
(Source: 2006 Hewitt Associates
Survey of 220 US Corporations)
(Read
Full)
Become
a Millionaire with your 401k Retirement Plan
In 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)
Roth
401k - A Look at the Final Roth 401k Rules
Starting 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 Portability
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)
Benefits
of Having a Spouse for Individual Retirement Accounts (IRAs)
If 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)
Defined
Benefit Pension Plans - Retirement Planning
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)
Roth
IRA Contribution Limits for 2005, 2006, 2007, etc
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)
401k
and IRA Rollovers - Direct IRA Rollover Rules - 20% IRA Withholding
Law A Direct IRA Rollover
is when your 401k retirement savings (or 401k distributions) are
transferred directly from your old employer's account to your
own Individual Retirement Account through a trustee-to-trustee
transfer. This means the money never actually reaches your hands,
it is wired from your old 401k administrator to your new one.
With this method, no taxes are withheld and you will NOT have
to pay any penalties. (Read
Full)
401k
Retirement Savings Inheritance
Each 401k plan has its own set of complex rules. For
example, some 401k plans will allow you to store up your 401k
inheritance treasure for years (without any withdrawals and any
taxes being charged on them). However, other 401k plans will want
you to withdraw this inheritance within a certain period of time,
after which you may be assessed a penalty of 10% or more. If you
inherit someone else's 401k, be sure to thoroughly read the Summary
of the 401k Document and all its details to find out what tax
rules apply to your instance of 401k inheritance. Usually, there
are a special set of rules if the deceased 401k saver was your
spouse and you are the beneficiary of your spouse's 401k retirement savings. (Read
Full)
Roth
IRA Rules - Roth IRA Retirement Planning
In this section,
we look at the general rules that apply to both the traditional
IRAs and the Roth IRA.
1) Restricted Transactions
You are not allowed to perform all of these following transactions
under both the traditional and the Roth IRA.
- Borrowing funds from your
IRA to pay off debt or loans
- Buying personal property with funds from
your IRA
- Selling your personal property to an IRA
(Read Full)
IRA
(Individual Retirement Account) Rollover v/s IRA Transfers - IRA
Rollover Rules 1) From
One IRA to Another
All retirement savings from the old IRA account are withdrawn
by the retiree and the IRA Custodian writes a check to the retiree.
The retiree then stores this money in his checking account for
a maximum of 60 days. Within these 60 days, the retiree must rollover
these savings to a new IRA account with a new broker such as Charles
Schwab. This type of a rollover is limited to once every 12 months...
(Read Full)
Blackout
Period - 401k Retirement Glossary A Blackout
Period (limited or denied access) in terms of 401k retirement
plans is an average of 60 days of the year during which plan participants
are NOT allowed to modify the structure and covenants of their
401k retirement plans. For example, if the job of 401k administrator
is being moved from one bank to another, a blackout period may
occur to easily facilitate this move. (Read
Full)
Withdrawing
Penalty Free Distributions from your IRA (Individual Retirement
Account) The annual pre-tax
or after-tax contributions you make towards a 401k retirement
savings plan is meant to help you have sufficient income upon
your retirement. However, there might be immediate times when
you desperately need the money, examples include huge medical
bills, death of spouse, disability, etc. If you withdraw money
from your IRA account before the age of 59 and 1/2, you will be
subject to a 10% early-distribution penalty as well as local and
federal state taxes. (Read Full)
What
is a 403b Plan? 403b Distributions & Contributions? Advantages
& Disadvantages of 403b Plans 403b plans are
retirement savings plans that allow you to make annual dollar
contributions (just like 401k plans)
and let them grow tax-deferred up until you withdraw them (upon
retirement). Note the fact that 403b plans allow for pre-tax contributions
(that is from your Gross Wage). (Read
Full)
Sticking
with your 401k Retirement Account Pays Off Long Term, study reveals A study carried
out by 2 Washington DC state organizations revealed that 401k
participants who contributed payments towards their employer sponsored
401k retirement plans over the past 7 years have seen growth rates
of over 50%. This is inspite of the tech boom bust of 2000 and
market declines in 2002.. (Read
Full)
Saver's
Credit: 401k Contributions Tax Credit for Low Income & Middle
Income Consumers If you fall in the category of low income
savers, you may be eligible for a tax credit of $1000 on contributions
made to 401k retirement plans, 403b plans, 457 government plans,
IRA (Individual Retirement Account) or Roth IRA. This new legislation
called the "Saver's Credit" went into effect in 2002
(thanks to the Economic Growth and Tax Relief Reconciliation Act
of 2001) and is a reduction to your Gross Income (so that you
have a less taxable income). It cannot be used as a $1000 refund
for extra cash flow... (Read Full)
401k
Investment Options
In general, there are 8 investment options available to most 401k
plan retirees. You can diversify your portfolio into high risk
and low risk investments and this will determine your total nest
egg upon retirement. If you want a safe secured income upon retirement,
we suggest investing in low risk securities.
1) Stock Mutual Funds: Stock
mutual funds are invested in various stocks traded in the public.
The value of stock mutual funds fluctuates highly from day to
day but over a longer term, they are known to have better returns
than some of the other above investments example US Treasury Bills,
Government Bonds, etc. (Read
Full)
Differences
between 401k Pre-Tax Contributions & After-Tax Contributions
Pre-tax contribution is
the amount of deductions you make from your monthly gross wage
into your 401k retirement savings account, BEFORE taxes have been
deducted. By making pre-tax contributions, you are lowering your
current taxable income. For example, if you earn $10,000 per month,
and contribute 10% of it towards a 401k retirement savings account,
then your current taxable income is lowered to 90% x $10,000 =
$9000. Instead of paying taxes on the $10,000, you will be paying
taxes only on the $9000! (Read
Full)
Frequently
Asked Roth 401k Questions 1) What's the difference between a Roth
401k and traditional 401k pre-tax deferral plan?
In a traditional 401k plan, annual contributions are
made with pre-tax dollars (meaning BEFORE taxes have been paid).
On the other hand, a Roth 401k plan requires annual contributions
to be made with AFTER-tax dollars (after taxes have been paid).
For example, if you earn $50,00 a year: (Read
Full)
Important
Questions on 401k Catch Up Contributions In the reforms brought about by the Growth and
Tax Relief Reconciliation Act of 2001 (EGTRRA), a new concept
called the 401k catch up contributions was introduced. 401k Catch
Up contributions allow retirement participants over the age of
50 to contribute extra payments each year ($5000 in the year 2006).
This move was done so as to encourage people to plan and start
saving money for their retirement, because its only your money
that will help you during retirement! (Read
Full)
401k
Retirement Plan Withdrawal Rules Most 401k retirement
plans do not allow you to withdraw money unless you are facing
some kind of a financial hardship. This is why some 401k withdrawals
are also known as "401k hardship withdrawals." The above
mentioned reasons such as death of a spouse (which is beyond human
control) or a large medical bill are valid financial hardships.
(Read Full)
What
is 401k Vesting and How Does it Work? Vesting is a type of
security feature for companies to retain talented and hardworking
employees for the longer term. 401k Vesting is the amount of time
you MUST work for a company to fully accrue your 401k savings
and not forfeit them (if you quit your job prematurely). Thus,
when you are "fully vested", this means you have accrued
your 401k retirement savings fully and can rollover into an IRA
incase you quit working for the company. (Read
Full)
What
is a 401k Plan? How does it work? What are the benefits of having
a 401k retirement plan? A 401k is a company/employer
sponsored retirement plan that allows workers to take out a portion
of money from their daily paycheques, store it on a retirement
plan account and earn interest tax-deferred. Tax-deferred means
this saved income is not taxable until you withdraw it at the
age of 65 or more... (Read Full)
401k
Lump Sum Rollover - Should Retirees Take the Cash or Rollover
to Company Stock? If you are nearing
your retirement or changing your employers, should you take the
401k cash distribution and roll it over to an IRA (individual
retirement account)? Apart from that, there is another
attractive option, and it is making a lump sum rollover to your
company's stock. (Read Full)
401k
Loans - Can You Withdraw Money from your 401k Account as a Loan? 401k retirement
plans are meant to grow tax-deferred continuously (without any
withdrawals) up until you hit retirement age. However, we don't
live in a financially perfect world. Things may come up in your
life that require you to have immediate emergency funds for example
death of spouse, big medical bill, etc. In such an event, yes
you can withdraw money from your 401k retirement account. (Read
Full)
What
is a 401k Plan? How does it work? What are the benefits of having
a 401k retirement plan? A 401k is a company/employer
sponsored retirement plan that allows workers to take out a portion
of money from their daily paycheques, store it on a retirement
plan account and earn interest tax-deferred. Tax-deferred means
this saved income is not taxable until you withdraw it at the
age of 65 or more... (Read Full)
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