401k And Ira

Employer 401K

Using Employer 401K Plans To Achieve Retirement Goals

Employer 401K

Employer 401K plans can be a great way to maximize your taxation and savings to prepare for retirement. Part of good retirement planning is understanding the effect that regular savings contributions can have to your lifetime returns when you consider the implications of compounding. You should also be aware of the substantial taxation savings that you accrue by making regular 401K contributions. There may be many advantages to maximizing your exposure to employer 401K so it's worth considering this as a part of your retirement planning.

There are many 401K plans that employer 401K plans can consider. This can include stocks, bonds, T-bonds, load and no load mutual funds. Depending on how your employer structures the setup, you many have a select group of options or you may be able to setup your affairs to invest in other options through a brokerage account.

Employer 401K

Employer 401K plans are usually run by a financial fiduciary who is responsible for providing all the employee 401K particulars and dealing with the documentation and associated responsibilities.

Some employer 401K accounts have a matching contribution provisions. This provides the opportunity for employers to realize taxation deductions. Employers either contribute a flat monthly fee to each account, a percentage of the employee's salary or match the employee's contribution up to 15% of gross salary. Some employee 401K setups that have this matching contribution stipulate a length of service clause which indicates when the employee gains official ownership of the contributions. If the employee terminates employment, then he/she may forfeit all or a portion of the matched contributions.

It is important to be aware that there are 401K maximum limits established by the IRS. For 2007, the limit is $15.500 with a catch up limit of $5,000 for those over the age of 50. The employer also sets their own individual 401K limits for employees.

Apart from the additional money you save for retirement, additional 401K savings can be effective in other ways. Most plans allow employees to borrow money from their accounts to pay for a house, medical bills or any incurred financial hardship. Employees may be entitled to receive a low interest rate with a stipulated pay back period. There may be penalties associated with this such as early withdrawal penalties or clauses that require the loan to be paid back with post tax dollars.

It is will worth while to investigate 401K info to determine the full effect of employer 401K plans. It is important for making wise decisions and exploiting the full potential of this savings avenue.

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