Looking Into 401K Plans

A 401K is a retirement plan that has been set up to help an individual prepare monetarily for retirement. Many employers offer this as part of company benefits to attract and keep good employees.

A 401k Plan is desirable for a number of reasons. First, your employer could also add to your account, effectively giving you added income. Also, 401k accounts are not taxed until they are withdrawn. Your monthly contributions to the account are taken out from your salary before the calculation of taxes, which means that the portion of your salary that gets taxed is lower than what it should be without the 401K contribution. Another benefit from a 401K plan is that you can loan against your own account, something that you may find useful at a time you may be needing additional financing.

On the other hand, a 401K plan also has its downside. One of these is that the only time you can withdraw from it without being penalized is when you are already 59 years old. Before this age, withdrawing your account could result to a penalty equivalent to 10% of your balance. The amount you withdraw would also be considered part of your gross income and would be taxed accordingly. Hence if you think you would be needing your funds before reaching 59 years of age, it may not be advantageous for you to maintain a 401K plan.

Furthermore, a large number of 401K plans only offer mutual funds as the choice for investments. This could be favorable, but it you are inclined to try out other investments, then it may not be a good idea to advance all your retirement money on a 401k account.

One possible alternative that you may want to think about is opening an IRA together with your 401k account. With the IRA you can have more options with regard to investment venues, and with a 401k account, you would be able to take advantage of its tax-deferred status as well as your employer’s share, and at the same time allow you to put some of your income away for retirement while making a profit.

For more details on rollover 401k, please go to http://401krolloverguides.com/

Incoming search terms for the article:

Share and Enjoy:
This entry was posted in 401k and tagged finance, ira rollover, personal finance, Retirement, rollever. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>