A 401k plan is a plan that allows employees of qualified
companies to save money for their retirement on a pre-tax basis. Some
employers choose to make matching contributions to their employees 401k
plans. The 401k plan is named after section 401(k) of the Internal Revenue
Service Code.
What are the benefits of a
401k plan?
Tax Savings - Money contributed to your 401k plan
is taken out of your paycheck before taxes. This lowers your gross income
in turn lowering your income tax.
Greater Investing Power - Your investing power is
greater because money is contributed to your 401k plan on a pretax basis.
Tax-Deffered Investment Growth - Money contributed
to your 401k plan in most cases is not taken out until you are 59 1/2.
Since you do not pay taxes until you begin t
aking distributions your
investments can accumulate faster than if you were paying taxes year
by year. Once you begin taking distributions, each distribution is taxed
as it is taken out.
Flexible Investment Options - 401k plans offered
through Associates in Excellence allow for a wide variety of investment
options to suit your needs. For more information please contact
us.
Professionally Managed - Associates in Excellence
professionally manages 401k plans; keeping track of your contributions
and investments. With our daily valuation system plan participants can
monitor and change their investments on a daily basis.
When can I take money out of my 401k plan?
At 59 1/2 you can begin taking distributions from your 401k plan.
If you need to withdraw money prior to 59 1/2 you will incur penalties
and be subject to taxes. Some 401k plans allow you to take a loan out
against your 401k to avoid these penalties and taxes.
What happens to my 401k plan if I change employers?
Depending upon your employer and plan you may be able to keep your
plan with your former employer. You may also be able to transfer your
old plan into your new plan or into a rollover IRA (Individual Retirement
Account).
