Withdrawals of Funds

In a 401k plan, Commonly all employers/organizations use to  impose some severe restrictions on withdrawals of pre-tax contribution or Roth contributions while a person remains in service with the company and is under the age of 59½. If you want to withdraw your fund before the age of 59½ then you have to pay an additional 10% early distribution penalty tax. There are also some several exceptions to this penalty and they are:

• If you die and therefore the total fund of your account is paid to your beneficiary.
• If the employees become disables
• If the participant terminate his job after 55 years old.
• If you want to take the money lesser than the allowed medical expense deduction, or your withdrawal is related to a qualified domestic relations order

 

Why to avoid early 401k fund withdrawal?

It is not a good idea to withdraw your 401k fund early as you will lose all the potential future investment growth of that retirement plan money. Also, as we discussed earlier you also have to pay the penalty for the early withdrawal.

Get Expert advice on 401k plan loans

If you are a 401k plan participant and seeking for urgent loans, then we can help you to borrow the money against your 401k account. Get useful tips and advice from our expert and get an instant loan. For more details visit
http://www.401kgps.com/401k-loan.aspx

401 K Loan- Your Good Friend during Financial Crisis

Borrowing a 401 K loan has its own unique advantages and disadvantages. The advantages include very low interest rates and no credit checks and loan repayment extensions in  case of a home loan. However, it is advisable not borrow funds from a 401K account as this may seriously impact the retirement goals and may incur heavy tax penalties in case of non-repayments.

401K plan is one of the most popular defined contribution plans in the U.S. The IRS allows 401K assets to be used for certain emergency situations. This plan offers distinct advantages of tax deferrals and borrowing or withdrawing from your own 401K accounts.

401K loans are quite different from other traditional loans as the borrower is borrowing from his own retirement savings. The government ensures that you pay back the amount borrowed from your funds by enforcing certain strict rules and regulations for the loan repayment in time.

The provision of a 401K loan depends upon how the plan has been set up and is not a mandatory requirement. It is advisable for the employees to comply with its strict guidelines so as to evade tax penalties.

The IRC mandates borrowing limits, repayment requirements and the consequences of non-repayment of the borrowed funds. The qualifications for borrowing of 401K loans are mandated by the employer who sets up the loan.

401K loans have unique advantages such as no credit checks as the funds are being borrowed from your own savings and most of the details are not passed on to credit reporting companies. These loans are generally defined with a lower than average interest rates. The interest paid back on a 401K loan is actually for making up the losses on the principal 401K funds.

It is always desirable to have emergency savings fund to cover unplanned financial emergencies 401K account should be the last resort and should not be relied upon at the time of short liquidity crunches.  It should be seriously treated as retirement income and not as crisis management funds.

Relying too much on the 401K account may seriously affect the retirement goals and may lead to serious tax consequences and penalties. It becomes important to understand 401K withdrawal and repayment rules. The loan repayment period for a 401 K loan is five years.

However, there may be an extension to loan repayment is when you have borrowed funds to purchase a home. There are many pros and cons of borrowing a 401K loan. This loan may deplete the retirement funds and these pre-retirement withdrawals are taxable.

If the borrower defaults the loan he may be subject to income taxes and 10% excise duty. The borrower is prohibited to contribute to his 401K plan for at least six months after an early distribution. No interest is earned on the investments during the loan repayment.

If the borrower decides to change his employer or if the job gets laid off, he may be asked to repay the entire loan within one month.401K plan administrator should be contacted to know about 401K loans rules and the status of your account for cash sittings that can be borrowed.

Maximize Your 401K Limits To Maximize Your Retirement Earnings

A 401 K investor’s total contributions include pre-tax deferral, employer matching contributions and pre-tax deferrals. A 401K contributor should be aware about his maximum 401K contributions. He should be aware about the catch –up contributions that can be made at the age of 50 or above to make additional savings for his retirement years.

401K is one of the retirement plans that many hardworking U.S citizens invest in. When an investor reaches the age of 50, his primary concern is about how much he has saved for his retirement years. As one reaches the age of 50, he should be aware of 401K contribution limits. Keeping themaximum number in mind, a 401K investor should be aware about catch-up contributions.

The 401 K limits are set by IRS every year keeping in mind the annual inflation. The total 401 K contribution limits depend upon the type of retirement plan. To maximize 401K contributions, one can contact his plan advisor or the employer who sets up this retirement plan.

401 K contribution limits for the year 2012have been increased, after re-calculating on account of inflation. For the year 2012, investors may contribute $ 17,000 as an elective deferral to their 401K plans. Making these contributions is easy as these are deducted from an employee’s pre-tax pay that reduces their federal and state taxes to be paid.

An employee’s total 401 K contributions over the entire investment period consist of pre-tax deferrals and catch up contributions. At the age of 50 years and above, an employee gets the additional benefits of catch up contributions that allow one to put an additional amount from his pre-tax salary.

The 401K contribution limits for the year 2012 is $ 17,000 for employees. At the age of 50 years and above, an investor can contribute an additional $ 5500 to for a total $ 22,500. This contribution limit is applicable to a traditional or a safe harbor plan.

If an investor has invested in a simple 401K plan, he may contribute $ 14,000 from his pre-tax salary. This is broken down to $ 11,500 for standard deferrals and $ 2,500 for catch-up contributions. One of the most important aspects of a 401K contribution is the employee match up to a certain ratio. One of the most popular employer match ratio is 50 cents to a dollar.

401K catch up contributions are high enough to make up for any losses during the investment period by allow making additional savings from the pre-tax salary. An investor can rebuild his retirement dreams by saving substantial amounts through maximum 401 K contributions allowed by the law.

The tax deferral on the contribution and the tax deferred growth on the interest earned over the investment years make 401K contributions an ideal growth vehicle for retirement.

Decide Your 401k Catch up limit

401k limit, for the year 2012.

The maximum amount a 401k participant can contribute to his 401k account is set every year by IRS after taking inflation into account. In year 2011, people can contribute up to $16,500 as an elective deferral to their 401k plan account. But, if the participant is 50 year old or more than it, then can contribute an additional catch up contribution of $5,500. But, for the year 2012, IRS has announced the maximum 401k contribution limit as elective deferral as $17,000. And the additional catch up limit has now become $6,000 for the year 2012.

 Your 401k Catch up limit:

401k GPS, the leading investment advisory firm of USA, can provide you the additional information about highly compensated employee limits, If you fall into that category.

The catch-up 401k limit for the year 2012, is now becomes $6,000, and the maximum 401k contribution limit announced by IRS for the year 2012 is $17,000.

How to choose 401k contribution Limit for your 401k  plan?

These are some important points, which can help you to decide the right contribution percentage to your 401k retirement plan.

1)      What is your company match offer?

2)      What is your limit and your company’s limit?

3)      What is your age?

4)      Your personal situations?

5)      Understand the power of Compound Interest very well.

What is 401k?

Define, What is 401k Plan?

A 401(K) is one of the most popular retirement savings plans in the U.S. It is a type of defined contribution plan, in which the employee makes tax-deferred contributions through automatic payroll deductions. The participating employees invest a portion of their paycheck into an investment account on a pre-tax basis. Depending upon the employer’s program, an employee’s contribution can be matched by the employer. The ultimate goal of a 401K investment is to allow participants to save for their retirement years.

 

 

How to Maximize 401k Employer Match?

As, we all know this truth that most of the employees are not taking the benefits of their employer’s matching contributions. If your contribution part or percentage is very high that you can obtain the $17,500 limit or $22,000 limit for those who are older than 50 years  then you should maximized your 401k contribution limit but minimized the employer’s matching contribution. The main purpose of this is to reach the IRS limit and maximize your employer’s matching contribution, so that you can maximize your take-home pay.

Points to be considered when selecting the 401k employer match.

a)      The demographics of the employee.

b)      If you have selected a vesting schedule, a portion of the match can be adjusted at a future date as it can reduce its effective cost.

c)       The 401k employer matching contribution offered by the employer.

d)      The last but not the least, The frequency of the 401k employer match offered by the employer.

4 top fidelity funds for the 401k plan.

1) Fidelity Low priced stock funds
2)Fidelity Focused Stocks Funds.(401k Funds)
3)Fidelity Select Health Care
4)Fidelity Contrafund

 

 

 

 

401K Tax Implications and Its Advantages To The Global Markets

When we talk about 401 tax implications, you must know that 401K tax-deferred retirement plans. The term tax deferred comes in the focus when participant put pre-tax dollars into this account directly from their pay-checks to submit their tax regime to the investment authorities. If you are a tax payer, the marginal tax bracket on the individuals is going to be higher so that you must retain some growth oriented processing of funds to make their post-retirement life in the fine tune. 401 tax implications ensure that taxes paid on these retirement funds must be less than the paid amount of a participant who works on other retirement benefits.

These tax implications are implicated in a number of aspects that you need to know. This tax structure comes when distributions confers due to the death or disability of the plan participant in the whole sole participation regime of the investment competency. The tax implications occur in the structure if you retired or left your undergone job after the retirement age of 55. 401 tax implications ensure that taxes paid on these retirement funds must be less than the paid amount of a participant who works on other retirement benefits.

You receive the entire distribution of tax amount as an important part of “substantially equal payments” over your incurred payment terms. If you paid for various medical expenses that exceeds across 7.5 pc of the gross income, 401K tax may come in the charge under the strict observation of the investment portfolio makers. These distributions are offered to the investors through qualified domestic relations courts set up after retaliated separation establishments.

If you sustain stock in your organization or Business Company, you may opt for the 401K implications. If you lose any tax advantages you will always get good results so that you may prevent any kind of financial loss. The importance of the tax implications in the today’s tough financial market is known as the most competent structure of the resonance in the financial market place. Now comes the question that how one can get the best advice to manage the tax implications.

The answer is pretty straight. When you consult a financial advisor or consultant who is proficient in the market occurrences, it can be very helpful to the retirees who want to get the right fundamentals to get idea about the applicable tax measurements. The consultation that you avail from a trained investment banker is very concise and precise as well. With the help of this consultation, one can get the perfect idea of 401K tax implications and its impact on overall tax deduction fallout. Go to a good financial consultant who has enough experience in the domain. The consultant captures the entire flow of the tax implications and designs a tax rebate plan that fascinates the overall structure of the tax measurements post-retirement.

 401K Tax implications create a major breakthrough for the as the most competent structure of the resonance in the financial market place. Now comes the question that how one can get the best advice to manage the tax implications.

How to plan a successful retirement investment?

Retirement investment is a planned approach towards a happy retirement. You can invest in various retirement plans based upon your retirement needs. For a successful retirement planning you can seek help from financial advisers, who may help you out in deciding the right long-term investment option that proves to be fruitful. Retirement investment is the only way of assuring a safe and secure future in today’s dynamic world economy. There are myriad ways to save for those retirement years. There are government retirement plans, employer offered retirement plans and individually sponsored retirement plans all of which offer super investor incentives. Perhaps the most successful approach to retirement investment is to save slowly and persistently and develop a wide investment portfolio with as much information as possible. There is a lot of retirement investment planning choices available in the market today. But only an expert intervention can guide you through numerous retirement investment options. The best retirement investment planning takes into account several investment options and invests in them so as to ensure a solid investment portfolio that will do well under any circumstances .If you are uncertain about your retirement investment, then you can make use of a retirement investment calculator to calculate your retirement funds and take necessary actions.

If the organization you are working with supports a 401K Plan, then considering it is not a bad idea. Just make sure that you read all the offer documents carefully before investing in it. One of the most popular retirement investment plans today is the Individual Retirement Account or IRA.

The traditional IRA is the most popular form of IRA up-to-date. It is widely popular because of the flexibility of the retirement account where the investor has the right to invest in non-traditional and traditional properties. The income gained by this account is tax-deferred, so that the taxes are only effective upon withdrawing the money from the account at the time of retirement.

There are some IRA rules that should be followed when dealing with this type of account. The only limitation in the IRA rules is that you should not reach 70 ½ at the end of the calendar year in which the distributions are to be made. Secondly, there should be some kind of compensation in the form of salaries, wages, commissions and bonuses to contribute to an IRA.

You can formulate your own retirement strategies. Your initial strategy should be to look for a retirement plan that will give you a wealthy retirement. Secondly, look for assets that give higher returns during long -term investments. Non-traditional investments which include real estate can prove to be lucrative long-term investments.

At this point of time, seek help from an experienced financial adviser as he would be able to pinpoint the best retirement investment and not just the conventional investment plans. So when you are thinking about retirement investment, it is advised to invest cleverly.

It is always important to remember that your present actions will have an impact on your future retirement investment. The success of your retirement investment depends upon how you treat your invested assets. Your retirement assets should be treated with zeal and some basic rules should be followed to evade from additional taxes and penalties.