The Basic Things You Should Know About 401k and 401k Contribution Limit

Nowadays, people are now looking for further ways to save up for the future so that they can have a more convenient retirement later on. In the United States, employees have the option to allocate portions of their salaries to a retirement savings plan initiated by their employer called 401k, a term coined from a section of the tax code which is the source of this provision. It is important to know what this is all about, the benefits that these employees can get from it, including the 401k contribution limit to this plan.

The idea of a 401k plan is that it is a savings retirement plan that can be used for the wise investments of mutual funds, stocks, bonds and other money market accounts of your choice so that when the amount you have invested does well, you get more money in the long run because your savings will be compounded until the time or age you will be eligible to claim them, usually when you reach 59.5 years old. Actually, in certain circumstances, you can withdraw them earlier but with the burden of incurring heavy penalties and taxes for it. However, unless there are valid reasons, like a permanent disability, you may not be penalized for the early withdrawal. Upon death of the 401k contributor, the beneficiary can also claim for early withdrawal.

Among others, the benefits you can get from taking part of this 401k plan are as follows:

1. Taxes can be deferred until the time of withdrawal where only the net salary of the employee gets taxed for the time being.

2. Employees can benefit more especially when the company or employer, as part of employee benefits, will match your contribution with a certain percentage of your contribution.

3. Employees can loan some amount from the 401k investment which is of course payable with interest.

4. Employees can transfer or roll over their 401k contribution from their previous employer to the next employer or to another legible retirement account.

Based on current information, the maximum 401k contribution limit for 2009 is $16,500. However, for those who are aged 50 and above, they are given the opportunity to catch up on top of the maximum $16,500 contribution but can only be limited to $5,000 per year. There are also special rules governing the contribution limit of highly compensated employees where it regulates them from maximizing their contribution to the 401k plan, depending on the contribution of ordinary employees. The Internal Revenue Code wants to make sure that not only the highly compensated employees will benefit from this 401k retirement plan where the companies will have to undergo nondiscrimination tests annually to make sure that everybody, including rank and file employees have equally availed of the plan.

It is important to know that the 401k contribution limit and catch-up limits are subject to change based on the inflation rate and cost of living adjustments. So it would really help to stay informed on further updates.

Autor: Richard L. Miller

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401k Contribution Limit
http://www.iracontributionssite.com

Added: November 23, 2009
Source: http://ezinearticles.com/

Salvation Gold and Silver For Your IRA-401K

SALVATION - Noun

1. the act of saving or protecting from harm, risk, loss, destruction, etc.
2. the state of being saved or protected from harm, risk, etc.
3. a source, cause, or means of being saved or protected from harm, risk, etc.
4. Theology. deliverance from the power and penalty of sin; redemption.

Funny way to start a financial advice article, right? Salvation? What does that have to do with my money, my financial security, my retirement? Is this a religious thing, or what? And by the way, who really needs another expert telling them what to do with their money and assets?

Simply put, after over 20 years of professional work in the financial and business markets (stock and bond trader, multiple business owner, and now as a precious metals broker) I have long since realized that the entire paper money assets backed industry is one giant pyramid of faith, hope, and habit. And for a long time, by design and purpose, you could make a lot of "money" from these markets, which in turn you could trade (purchase) for goods, services, and hard assets. Great while it lasted and a pretty good scheme for giving paper (currency or digital blips) in willing exchange for tangible goods. But the party is over and it is time to get serious. It is no longer about how well your IRA/401k are going to perform and what level of lifestyle you are planning and hoping for retirement. It is about, at the least, protecting yourself against the probable further collapse of the dollar and all the financial instruments attached to it. And at the most it is about survival.

Even in the most prosperous of times it has been financial conventional wisdom to create a hedge against against possible loss, somewhere in the range of 10% - 20% of your totals assets and net worth. It's really the same reason you have health and car insurance - you protect against the downside and possible catastrophe. Very prudent, reasonable and smart, and everyone would agree that those safety nets are a no brainer.

So what about your IRA/401k? Or your other paper assets? It is beyond the scope of this article to address the thorough rot and precariousness of the dollar but it is crystal clear it is loosing value and purchasing power rapidly. The best way right now to create an insurance policy for your money and assets is to hedge with precious metals. Gold and silver are REAL MONEY, they are increasing in value to new record levels, and they retain their purchasing power relative to inflation, generally speaking. And I will be clear: I am talking about real physical ownership of gold and silver - no gold mine stocks, ETFs, or other paper promise or certificate.

Moving some of your assets into gold and silver, including your IRA/401ks, is usually just a matter of procedure and paperwork and it is best to consult with your broker or other financial professional. The important thing is to make the decision. Even the most conservative and cautious hedge could be the smartest move you have ever made - I like to call it financial salvation.

Autor: Aaron Kutchinsky

Aaron Kutchinsky is a lecturer/seminar leader and expert precious metals broker on the subject of proactive and timely personal and community economic protection and preservation.

Salvation Investing is the concept, and understanding, of absolute and urgent protection of your equity investments, worldly assets, and personal safety: Gold, silver and other precious metals are real money, wealth, and treasure to safeguard and firewall you, your family, and your community against the probable and catastrophic collapse of US/Global currencies and financial structures.

http://www.salvationgoldandsilver.wordpress.com

Added: November 22, 2009
Source: http://ezinearticles.com/

When to Withdraw From 401k Account

Knowing when to withdraw from a 401K account is extremely important knowledge for your retirement plan. The real short answer to this question is not until you reach retirement age, which is 59 years and 6 months of age, however, there is really more that you should know than that.

First of all, you can start to take payments when you reach retirement age (59 and 1/2 years old) and you have to start taking payments before you are seventy years old.

When the economy is in bad shape and you are watching your savings plummet, however, it is easy to think you should go ahead and get your money now. This idea has some serious consequences, however. You will have to pay both federal and state taxes on the money you take out, plus a ten percent early withdrawal fee-this amounts to a great deal of money, plus the money you are missing out on that you would have accumulated up to the point of retirement.

Of course, if you are watching your balance drop, you may decide this is worth it. Most financial professionals, however, will strongly advice you against this at any cost, and will advice you to possibly switch your investment plans, and stick with it. If you decide to go through with this and are younger than retirement age things are much more complicated.

You cannot take any money from the account at any time you want, you can only do this immediately after you have left a job. At this point you have four options, you can roll it into a plan with your new employer, roll it into an IRA, leave the money where it is, or cash out. There are of course exceptions to this rule under extraordinary circumstances.

Knowing how and when to withdraw from a 401k account is extremely important, especially for avoiding high penalties and losing your retirement savings. Deciding to cash out is a big decision, and one you'll want to talk about with a financial professional and be very informed about.

Autor: Jennifer Quilter

If you're serious about looking to cash out 401K plans visit my site for more information about 401K and IRA options for retirement savings.

Added: November 21, 2009
Source: http://ezinearticles.com/

Understanding 401 k Plans and Their Benefits

The 401(k) plan allows workers in the United States to save for retirement through automatic payroll deduction. The primary benefit of the 401(k) plan is that the money is invested before income taxes are deducted so the entire total is invested instead of the total minus taxes that would be invested outside of a 401(k) plan. Income taxes must eventually be paid on the original investment and any accrued interest or growth but only upon withdrawal. What makes this income tax deferment an especially good deal for most investors is that they're typically going to be in a higher tax bracket during their working years when they're contributing to the 401(k) plan then they will be in their retirement years when they're making withdrawals.

As an employee benefit, many employers also choose to match all or part of an employee's 401(k) contribution. This match is often in company stock but the employee can subsequently reallocate the investment as he or she chooses. In fact, many large employers are moving from funding pension plans and their substantial and often hard to account for future costs to matching 401(k) contributions instead. The employee gets greater control over their retirement investments and the employer reduces costs while offering a benefit that most employees value.

401(k) funds can also, under certain circumstances, be withdrawn to help pay for certain qualified expenses. In effect, these withdrawals are a loan of 401(k) assets of an employee to himself or herself that will then be repaid through payroll deduction just like the 401(k) account was originally funded. These loans are not without cost, though. Because these accounts are meant to be used as a vehicle to save for retirement there's a 10% penalty based on the amount withdrawn and income tax must also be paid on the balance withdrawn as well.

401(k) plans are a great way to save for retirement but aren't always the best option for retirement savings. Depending on employer match policies and the types of investments available in the plan, it may make more sense to forsake the tax benefit of the 401(k) and invest all or a portion of retirement savings in Individual Retirement Accounts (IRA) accounts or other investments like real estate or commodities.

Autor: Marc Johnson

Marc is a prolific author with articles in a wide variety of interests covering an eclectic array of subject matter. Take a look at his latest website at http://www.bedspreadskingsize.net which covers bedspreads king size

Added: November 20, 2009
Source: http://ezinearticles.com/

Understanding the Types of Individual Retirement Accounts

The Individual Retirement Account or IRA is a retirement savings account offered in the United States of America. The primary benefit of investments held in an IRA account is that the account holder need not pay taxes on money put in the account (in the case of a traditional IRA) or on money taken from the account (for a Roth IRA).

There are five different types of IRAs:

1. Traditional IRA
The original type of IRA called the "traditional" IRA provides tax benefits by deferring taxes on all funds invested in the account until the time that those funds are withdrawn from the account. All earnings within the IRA account are exempt from taxation until they are withdrawn as well. Upon withdrawal (withdrawal can occur any time after age 59 1/2) funds are taxed at the account owner's current income tax rate.

2. Roth IRA
Named for Senator William Roth who introduced the bill that created this type of IRA, the Roth IRA is the same in every respect to the traditional IRA with one important difference. Contributions are made with after tax dollars and qualified withdrawals can be taken tax free. This includes the original sums invested and all growth and earnings that have occurred over the life of the account.

3. SEP IRA
A type of traditional IRA for self-employed persons that allows them to make contributions to an account established in their name instead of in the name of their company.

4. SIMPLE IRA
A pension plan offered by an employer that allows both employee and employer contributions. This is similar to a 401k plan but the contribution limits are lower and administration of the plan is much simpler (and therefore less expensive).

5. Self-directed IRA
A traditional, Roth, or SEP IRA in which the account holder makes all investment decisions instead of the trustee or custodian of the account making the investment decisions as is typically the case. A custodian still provides oversight of the account but all investment decisions are directed by the account owner.

No matter which type of IRA you choose, all offer a tax deferment or elimination benefit that makes them very popular investment vehicles.

Autor: Marc Johnson

Marc is a freelance author that writes on a wide variety of topics for an equally wide variety of websites and publications. His latest project at http://www.indoorpropaneheaters.org is all about indoor propane heaters

Added: November 19, 2009
Source: http://ezinearticles.com/

Exploring Options For Rolling Over a 401k

Sooner or later just about all of us are going to find ourselves in the situation of changing jobs after having invested money into the company 401k plan. While investing in a 401k is nearly always a good idea, leaving your job at that company means you're going to have to decide what you want to do with that money. As 401k plans are tied to specific employers, once you leave your company you're not allowed to contribute to that account any more. Hence the need for a 401k rollover. Let's see what some of your options are.

There are some people out there that absolutely love to invest. They like trying out new and different investments, they like watching the financial news channels, and they like poring over numbers from the stock market. If you are one of these people, chances are good that you will not be satisfied with just a few mutual funds for investment options. If this is the case, and you have money in a 401k that you need to move, your best bet is to take it to a broker, and roll the money into an IRA at that company. Investing your money with a broker means that you will have virtually unlimited options when it comes to investment vehicles.

Make sure to explore all of your options when you are looking to do a 401k rollover. There are some options that may look attractive to start with but on closer inspection prove to be a bad idea. Make sure to plan your actions wisely.

Autor: Jerri Garces

Jerri Garces writes articles to help people get the most out of their retirement plans. You can read more about doing a 401k rollover at Quick 401k Rollover.

Added: November 17, 2009
Source: http://ezinearticles.com/

Tips For Rolling Over a 401k

Anytime you leave a job after investing money into the 401k offered by your previous employer, you are faced with the situation of needing to decide what to do with that money. You have several options, and some of them are good but others should be avoided. Let's take a look at what you should do to make your 401k rollover easy and hassle-free.

First off, when you leave a job and have money in the 401k, your first option is to simply leave the money where it is. In many cases you can leave it there indefinitely and just keep it invested as it was. This is often an attractive option for many people, especially if you are in the middle of a job search or a career change. However, long term, this is not the best solution.

The easiest thing to do with money left in an old 401k is to simply roll it into your current 401k. This has the advantage of keeping all of your 401k money in the same account for easy control and access. The downside to doing this is that you will only have the investment options provided by your current employer. If you don't like playing the stock market and are looking for a "set it and forget it" investing approach, then this will probably be sufficient for you. On the other hand, if you like to broaden your investment options, then this situation will probably not have enough choice for you.

The important thing to keep in mind when doing a 401k rollover is to take your time and research your options. In most cases you're not under any sort of deadline, so be comfortable with your decisions before taking action.

Autor: Jerri Garces

Jerri Garces writes articles to help people get the most out of their retirement plans. You can read more about doing a 401k rollover at Quick 401k Rollover.

Added: November 17, 2009
Source: http://ezinearticles.com/