Dec 1

can some one please explain me in simple terms what is a 401k ..
how does it benefit us
how to select the best 401k plan..
can we opt out of 401k plan..

2 comments so far...

  • Sean Roberts Said on December 1st, 2009 at 3:13 am:

    A 401K is a type of retirement account set up by your employer. The term 401K refers to the section of the IRS code which sets the rules for these types of retirement plans.

    The employer takes the money out of your income and puts into the 401K prior to figuring income taxes on your income. Usually the employer will match some your contribution. IRS sets some rules for how much the employer can contribute, and employer also has some rules for how much the company is willing to contribute. The money in the 401K is tax deferred, not tax exempt. This means that when you withdraw the money, you will have to pay tax on it.

    The 401K is a vehicle for investment, it is not a specific investment. There is usually a wide selection of different types on investments you can choose. The plan is administered by a third party. Usually a brokerage firm. If you withdraw money from your 401K prior to reaching age 59½ years old, there is a penalty for early withdrawal. However, there are a few exceptions to these rules.

    You are not required to participate in the 401K. You can choose not to contribute to the retirement plan. However since your employer will be matching some of your contributions, it would be to your advantage to contribute.

  • Uncle D Said on December 1st, 2009 at 3:48 am:

    How to Have the best 401K
    If you have a 401K with your employer you have a nice benefit to take advantage of. Money comes out of your paycheck tax free. For most people putting a dollar into their 401K reduces their paycheck by seventy cents! If your employer matches 100 percent then 70 cents will get you 2 dollars deposited into your account. That is a very good deal.
    Choose the best funds available.
    You never want to opt out of a 401K unless it is loaded with fees. I heard of a very few where the company management or the union we getting a cut of the fees.

  • FernAlixLaRocca Said on January 19th, 2010 at 11:48 pm:

    Your Guide to a Roth IRA Conversion and 401K tips here

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