What financial tools are you using to fund your coming retirement?
Do you have a 401 (k) plan? Or is your question … what is a 401 (k) ?
401(K) plans are tax-deferred retirement savings plans for employees. The employer sets them up and each company has a slightly different 401(k). They are part of a family of retirement plans known as "defined contribution" plans - the amount contributed is defined by the employer or the employee.
The 401(k) account is the common name in the United States for the tax qualified defined contribution pension plan account and takes its name from subsection 401(k) of the Internal Revenue Code (Title 26 of the United States Code). 401(k) are "defined contribution plans" with annual contributions limited to $17,500 as of 2013. Contributions are "tax-deferred"—deducted from paychecks before taxes and then taxed when a withdrawal is made from the 401(k) account. Depending on the employer's program a portion of the employee's contribution may be matched by the employer. They are not the only type of employer-provided defined contribution pension plans; 403(b) and 401(a) defined contribution plans also exist yet have higher mandatory limits.
When you join a 401(K) plan, you tell your employer how much money you want to contribute to your account. This amount is deducted from your salary before taxes are applied, so you pay less income tax. More importantly, the money is deducted even before you have received it, making it the easiest savings plan to contribute to. Your employer may match a portion of your contribution. The money is invested by the plan administrator (on your behalf) in mutual funds, bonds, money market accounts, etc.
With a 401 (k) you decide on the mix of investments. They usually have a list of investment vehicles you can choose from as well as some guidelines for the level of risk you are willing to take. Since the plan is an incentive for retirement savings, there is one condition: if you withdraw the money before you are 59½ years old, you will have to pay tax as well as a 10% penalty fine to the IRS.
When considering your needs for retirement or insurance products for your home or business consider contacting Bennett Insurance Group at 623-979-4140
Presented By:
Jim Bennett
Bennett Insurance Group, Inc.
623-979-4140
http://jimbennettinsurance.com
jim@jimbennettinsurance.com
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