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most comprehensive 401(k) research planning website on the planet!
We offer articles & insights on popular 401k topics including
setting up a 401k, rollovers to a Roth IRA, Roth 401k or Traditional
IRA, loans, withdrawals and distributions as well as IRA rollovers,
income limits, frequently asked questions (FAQs), 401(k) how to
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We also bring you cutting edge developments & investment advice/news
surrounding 401(k) plans.
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Top
10 Tips about IRA Contributions
(August 31st, 2009)
Saving towards your retirement in a self-managed Individual Retirement
Account (IRA) is a big responsibility and it is important you are
made aware of common pitfalls, penalties, and problems that could
arise in your career as a self-IRA manager. In this article, we
will tell you the top 10 things you should know about your IRA.
i) Contributions made to a traditional IRA are made on a pre-tax
basis - This means you can get an instant deduction on
your income tax return by contributing to an IRA. For instance,
if you earn $6,500 a month gross wage and contribute 15% of this
to your employer sponsored 401(k) plan, this totals $975. You would
then subtract this $975 from your original gross wage ($6,500 -
$975) = $5,525 to arrive at your gross taxable income, which is
$5,525 in this case... (View Full)
Top
Frequently Asked Questions about 401(k) Plans - Loans & Rollovers
(August 30th, 2009)
 My
spouse and I both contribute to a 401(k) plan and plan to borrow
money from it to purchase our first home. Does it matter from which
plan we borrow?
- There are 2 issues you should consider when
choosing what plan to withdraw funds from. The first is either of
you could change jobs during the loan repayment period. If either
of you change jobs, you will have to repay the outstanding balance
in a lump sum in order to avoid paying taxes. To best solve this
problem, borrow a loan from the plan of the person who has the best
chance to stay in the job longer. (View
Full)
Salary
Deferral Contributions Made to 401(k) Retirement Account
(August 31st, 2009)
 Most
employees would agree that contributing towards their 401(k) retirement
plan and building up a nest egg for the future is vital to their
success in the future. Despite of knowing this, a significant number
of corporate employees in America do not have 401(k) or other retirement
plans. The reason for this is that these employees do not recognize
the important of having and maintaining a 401k retirement plan or
have lack knowledge of 401k contribution rules and limits. In this
article, we discuss some of the examples of making salary deferral
contributions to an employer sponsored 401(k) plan... (View
Full)
Important
Year End Statements for Individual Retirement Account (IRA) Holders
(August 31st, 2009)
If you have an Individual Retirement Account (IRA), you should know
that your IRA custodian must provide you with a year-end statement
of the value of your IRA. Typical year-end statements include the
fair market value statement, IRS Form 1099-R, notice of minimum
required distributions (RMDs), etc; and these forms must be mailed
to you by January 31st, of the year following the pre-ceding tax
year. In this article, we will briefly explore each of these statements.
1) Fair Market Value Statement - The
fair market value statement, as the name suggests will tell you
the closing balance of your IRA account as of December 31st, of
the preceding year. The closing balance of your IRA at year-end
is especially important for those people who are 70 and ½
years of age or above because it is this number that will be used
with the life expectancy ratio to calculate the minimum required
distribution for that year. The minimum required distribution formula
is as follows... (View
Full)
The
401k / IRA Rollover Checklist
(August 31st, 2009)
In order to do a successful and timely rollover, make sure you have
access or possess all of these documents. Carrying out a rollover
properly can save you from getting in trouble with the IRS in terms
of the 20% withholding tax, 10% early withdrawal penalty and lots
of headache, so be sure to read below!
I) Get all 401k distribution forms from
your past employer and contact your prior plan provider to request
a rollover of your funds in to the account of your new employer
(your prior plan provider may require that you complete a distribution
form or other documentation). If your rollover deposit is not received
by the new employer within 30 days, usually the new employer will
contact the 401k administrator of your old employer to update on
the status of funds being distributed... (View
Full)
Top
Frequently Asked Questions about 401(k) Plans - Mergers & Bankruptcy
(August 30th, 2009)
My
company was recently acquired or sold and the new company informed
us our money will be transferred to their new 401(k) plan. However,
I do not like the range of investments offered in the new plan,
can I leave the money in the old 401(k) plan with my old employer
or transfer it to an IRA?
- This happens quite often when a company
is acquired, merges with another company or is sold off. The acquiring
company wants to reduce the hassle of switching 401(k) plans as
well as reducing the administration costs. The final decision of
how the 401(k) funds will be moved and managed will depend on the
purchase agreement confirmed between the 2 companies. The purchase
agreement usually states for the automatic transfer of funds from
the old company’s 401(k) plan to the new company’s plan.
Depending on the costs involved, the purchase agreement may not
allow you the employee to withdraw or take a distribution of your
money, or roll it to an IRA due to the inconvenience of transferring
to a large number of IRAs or due to the risk of you spending your
retirement money away. (View
Full)
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A
Look at 401(k) Contribution & Catch Up Contribution Limits
(August 29th, 2009)
 A
401(k) retirement plan will be a person’s best friend when
old age hits and the person can no longer work, as it will provide
the social security that even the government’s pension system
does not guarantee. Therefore, it is your responsibility to make
the most of your 401(k) plan so that you can achieve your retirement
dreams whether it be cruising the world in a ship, spending time
in a vacation home in an exotic location or paying for college for
your grandchildren. In this article, we discuss 401k contribution
limits, catch up contributions for people over 50 years, pre-tax
contribution limits as well as rules for highly compensated employees.
(View Full)
401(k)
Rules – Contribution Limits, Catch-Up Contribution Rules,
Vesting Rules, 401k Eligibility Rules
(August 26th, 2009)
 If
you are working for a large organization and do not have a 401(k)
retirement plan, or if you already have one but are not familiar
with the many rules that mandate 401k plans, this article is for
you! We discuss 401k contribution limits, catch up rules for people
over 50 years of age, vesting rules as well as things you have to
be eligible for before you can contribute to a 401(k). We will cover
most of the 401k rules but in order to get a comprehensive list
of rules, you need to ask your 401k administrator as each company
has its own set of customized rules regarding 401(k) contributions,
limits and vesting rules... (View
Full)
5 Things
Every 401(k) Plan Should Have
(August 24th, 2009)
 The
greatest lesson to be learnt from this economic downtown of 2009
is to save for a rainy day, have an emergency fund in case you lose
your job (just as millions of Americans are losing their jobs and
the unemployment rate claws close to 10%). As the stock market continues
to be very risky and volatile, a larger number of small business
owners are looking to set up 401(k) plans for themselves and their
employees, with there being 2 advantages to doing so; 1) they can
max out their 401(k) plans by contributing the maximum and receive
a larger tax deduction and 2) they can offer 401(k) plans to attract
and retain talented employees.(View Full)
IRA
Rollover – Frequently Asked Questions about IRA Rollovers
(August 22nd, 2009)
 The
IRA is a tax specialized account designed to receive funds rolled
over from a 401(k) to a self-managed Individual Retirement Account
(IRA). Rollover funds can also be derived from 403b, 457 plans and
other profit sharing plans. The IRA allows funds in to grow tax-free
and penalty free when rolled over until withdrawn during retirement...
(View Full)
Qualifying
Incomes for Roth & Traditional IRA Contributions
(August 22nd, 2009)
 In
order to make contributions to a Roth IRA or traditional IRA account,
you or your spouse must have qualifying compensation income, which
is the purpose of this article. There are 3 categories of qualifying
income. For employees, compensation income generally includes wages,
salaries, tips, sales commissions, bonuses, etc. However, the following
types of income that an employee generally receives do NOT count
as compensation income:
- Pension or annuity payments
- Foreign earned income/dividends
- Deferred compensation... (View
Full)
Top
Frequently Asked Questions about 401(k) Plans - Company Stock
(August 15th, 2009)
I
own employer stock in my 401(k) account and because I am about to
retire soon and will request a distribution, I would like to know
the tax advantages of having company stock.
- Company stock is taxed differently when it
is distributed to you in cash from your 401(k) account. With company
stock you will have to pay taxes on the value of the stock at the
time it was acquired through the plan, not the value at the time
the funds are distributed to you. This means any investment appreciation
or gains you make on your company stock will not be taxed. Be aware
though that this only works if you do not roll over the shares to
an IRA. (View
Full)
The
Roth 401(k) – How After-Tax Contributions Work, Comparisons
with Roth IRA, Future Tax Rates, Contribution Limits & Frequently
Asked Questions
(August 11th, 2009)
In 2006, a new form of a 401(k) plan funded
with after-tax contributions was created, and was named based on
the Roth IRA and the traditional 401(k) to come up with a similar
but new name, the “Roth 401k.” The Roth 401k was created
by the provisions stated in the Economic Growth and Tax Relief Reconciliation
Act of 2001 (EGTRA). Particularly modeled after the Roth IRA, the
Roth 401(k) does NOT allow investors to deduct their contributions
to this plan from their income tax returns, and receive a break
or a deduction from their taxes. This thus creates more tax revenue
for the IRS in the short term, and that is one of the main reasons
why the Roth 401(k) is favoured by the taxation authorities... (View
Full)
Rules
for Making Roth IRA Contributions
(August 8th, 2009)
Most American employees who have a pay check
can contribute to a Roth IRA; even those people who aren't eligible
to convert a traditional IRA to a Roth IRA can contribute to a Roth
IRA. Here are the basic rules for contributing to a Roth IRA, as
well as their pros/cons.
i) No age limit: In traditional IRAs, people who
turn 70 and ½ years old can no longer contribute to their
traditional IRAs. This is not the case for Roth IRA; an investor
contributing to a Roth IRA can do it for a lifetime! Thus, if you
would like to set up a Roth IRA at 82 years of age and save for
your retirement, you can still do it with Roth IRAs! (View
Full)
What
is a Traditional IRA? History of IRAs, Eligibility Requirements,
Ineligible Compensation, Distributions from a Traditional IRA &
How Income Tax Deductions Work
(August 8th, 2009)
 According
to the IRS, a traditional IRA is any IRA that is not a Roth or a
SIMPLE IRA. Although similar, there are subtle differences between
a traditional IRA and its counterparts, the Roth and Simple IRAs.
The traditional IRA is also known as the “original IRA”
or “regular IRA” because it was the first one that was
ever invented in 1974. In traditional IRA plans, contributions are
deductible from your gross income in the year you make those contributions
and earnings grow tax-deferred. All gains made on investments and
all contributions made over the working life of the employee will
be subject to taxation upon withdrawals during retirement (when
that investor retires and begins taking distributions) from his
traditional IRA. These types of contributions are known as “pre-tax”
IRA contributions... (View Full)
How
to Invest in Real Estate using your Individual Retirement Account
(IRA)
(August 1st, 2009)
 You
can invest in real estate via several methods if you already have
an IRA. In fact, you can invest in real estate using your 401(k),
403(b) or 457(b) plan if you invest in Type 1 below, because it
is very similar to buying stocks and selling them. The 2nd type
of investment we cover requires you to create a self-directed IRA
where you actually buy physical real estate and not just real estate
stocks/mutual funds. We discuss the investment choices available
to you below... (View Full)
Rolling
your 401(k) – Trustee to Trustee Direct Rollover, Modified
Adjusted Gross Income (MAGI) Income Limits for Deductible Contributions
to a Traditional IRA
(July 29th, 2009)
When
you leave your current job, you will have to most likely fill out
the 401(k) distribution election form. The most logical thing to
do with your 401(k) from a taxation perspective is to do a direct
rollover (also known as a trustee-to-trustee transfer) of your money.
With this type of rollover, the money goes directly from your 401k
plan into another tax-deferred account, either an Individual Retirement
Account (IRA) or your new employer’s 401(k) plan, 403(b) plan
or 457 plan. 403(b) plans are generally for teachers, educators
and non-profit employees while 457 plans are offered by local state
governments. With a direct 401k rollover, you do not have to pay
any taxes on the money when it comes out of your old employer’s
401(k)... (View Full)
Top
Frequently Asked Questions about 401(k) Plans - Contributions
(July 24th, 2009)
I
quit my previous employer and came back six months later. I participated
in the 401k plan before I left. Do I have to wait one year before
I can contribute to the 401(k) plan again?
- No you do not have to wait 1 year to
contribute to your company’s 401(k) plan if your break in
service is less than 1 year. If you have already satisfied the eligibility
requirements the first time, you do not have to do it the 2nd time
if your break is less than 1 year.
I cannot afford to contribute to my 401(k) plan right now. If I
don’t join my plan as soon as I am eligible, do I lose my
right to contribute later? (View
Full)
Hardship
Withdrawals and Accessing 401(k) Loans
(July 28th, 2009)
 A
401(k) retirement plan is meant for your retiring years when you
are no longer working and will rely on this income to support your
standard of living. However, there are always circumstances in life
when you have no choice but to tap your 401k account. Such a case
would be termed as a '401k hardship withdrawal' and there are many
rules surrounding this feature. For this reason, the government
allows 401k administrators to allow investors to borrow loans from
their 401k plans. Be sure to check with your 401k administrator
whether a 401k loan is available, as it is not mandatory for them
to provide this service... (View
Full)
401(k)
Vesting – How It Works, Vesting Schedule, Number of Years
of Service
(July 26th, 2009)
 Vesting
refers to the numbers of years of work you must perform for a company
before earning a non-forfeitable right to your 401(k) retirement
money, in case you leave the company or get laid off. All the money
you have contributed to your 401(k) plan + any employer matched
contributions are 100% vested if you can withdraw all of it upon
leaving the company; this is known as withdrawal of accrued benefits.
As a rule of thumb, if you turn 65 years of age while still working
for the same employer, you are 100% vested and can leave the company
and take 100% of your accrued benefits... (View
Full)
401(k)
Lump Sum Distributions – Tax Advantages, Rollover to IRA,
Tax Deferred Contributions and more
(July 24th, 2009)
 A
lump sum 401(k) distribution means the entire balance in your 401k
account is withdrawn in a single calendar year for many reasons,
some of which could be reaching age 59 and ½ years, leaving
your current employer, or suffering a disability. Note that if you
are less than 55 years of age, leave your current employer and take
an entire cash lump sum distribution of your 401k account rather
than rolling over to an IRA, you will be subject to a 10% early
withdrawal penalty, which you want to avoid... (View
Full)
401(k)
Loan - Should You Ever Take One? Pros and Cons of Borrowing from
401k Plans
(June 30th, 2009)
You
may sometimes find yourself in temporary financial hardship where
expenses have sprung up such as a large medical bill, phone bill,
college expense, etc and you need to immediately borrow a loan.
Your options include credit card, personal loan from the bank or
a 401k loan. Afterall, the money in your 401k plan is all yours,
so why do you need the permission to borrow? Financial experts however
advise to stay away from borrowing 401k loans as much as you can.
In this article, we explore the pros and cons of borrowing from
401k plans and you can then decide for yourself whether it is worth
borrowing or not... (View Full)
401k
Rollovers to an Individual Retirement Account (IRA) – Things
to Consider Before You Rollover, Avoid Transfer Penalties, Move
Employer Stock, etc.
(June 28th, 2009)
 When
you quit your current job and move to a new employer, and if you
have maintained a 401(k) retirement plan with your past employer,
the above questions posed in the title will attack you; so knowing
what to do in such cases is the best way to go. Conventional investors
will tell us that when you leave your job, you should rollover your
401(k) to an Individual Retirement Account (IRA). IRA rollovers
allow you to continue deferring taxes and avoid early-withdrawal
penalties which can be up to 20%! However, if you have a really
good 401k plan with your old employer, maybe you would prefer to
leave your money there, or rollover the funds to your new company’s
401k plan? Here is how you can decide if a 401k rollover to an IRA
is the right choice for you... (View
Full)
Losses
on 401(k) Investments due to Fiduciary Breaches & Scams - Employee
Retirement Income Security Act (ERISA)
(June 28th, 2009)
 The
US Supreme court ruled on February 20th, 2008 that those individuals
who have 401(k) plans and have been subject to financial scams,
fiduciary breaches that have resulted in investment losses have
the right to recover their losses. This was considered a landmark
ruling in favour of the 50 million Americans who have 401(k) plans
and who are at high risk of abuse by mutual fund administrators
& managers. In this article, we explore the rulings of the Supreme
Court and how these rulings differ from past rulings, and if your
401(k) loss is protected under these new laws... (View
Full)
401(k)
Withdrawals – Early Withdrawal Penalties, Rollover Withdrawals,
Exceptions and Tax Consequences
(June 1st, 2009)
 The
purpose of 401(k) retirement plans is to encourage people to save
for their retirement years and not rely on the country’s broken
social security and pension system. Therefore, it is the responsibility
of the government to impose rules and regulations that discourage
withdrawal of funds from 401(k) retirement accounts. In this article,
we explore the various rules encompassing 401k withdrawals, penalties
involved, exceptions that may apply to you as well as tax consequences
of 401(k) withdrawals... (View
Full)
Organizations
Reconsider 401(k) Plan Matching Contributions for Employees
(June 25th, 2009)
 Due
to the current economic downturn, most organizations are reconsidering
their matching contributions to employees’ 401(k) plans. In
fact, it is estimated that every 1 out of 4 companies have temporarily
suspended matching contributions for their employees’ 401(k)
plans. These companies say however once the economy improves and
so does their cash flow, they will reinstate 401(k) matching contributions
for all employees. This piece of news comes from a latest survey
done by the Charles Schwab. Among list of companies who have suspended
401k matching include Sears Holdings, Starbucks, Kodak and Hewlett
Packard (HP)... (View
Full)
What
is Modified Adjusted Gross Income (MAGI)? Definition of Gross Income
(June 31st, 2009)
 Your
modified adjusted gross income for purposes of Roth IRA is your
adjusted gross income shown on your tax return modified as follows:
1. Subtract the following
a. Roth IRA conversions included on IRS Form
1040 line 15(b) + Form 1040A line(11b) or Form 1040NR line16(b).
b. Minimum required distributions from IRAs (for conversions or
rollovers from qualified retirement plans only).
c. Roth IRA rollovers from qualified retirement plans shown on IRS
Form 1040 line(16b), Form 1040A line12(b) or Form 1040NR, line(17b)...
(View Full)
How
is a Traditional IRA different from a Roth IRA? Comparison Chart,
Questions and Answers
(July 29th, 2009)
How is a Traditional IRA different from
a Roth IRA? Comparison Chart, Questions and Answers... (View
Full)
Retirement
Accounts Rollover Chart
(August 5th, 2009)
Retirement Accounts Rollover Chart - (View
comprehensive chart)
Understanding
the Rules for Participating in a 401(k) Plan, Beneficiary Appointment,
401(k) Plans for High Paid Employees
(July 15th, 2009)
 Self-employed
business people or those employees whose employer’s do not
offer a retirement plan sometimes want to know how they can “open
a 401k account.” Unfortunately, it is not very simple and
unlike an Individual Retirement Account (IRA) where you can open
your own IRA account, a 401(k) is only available through your employer.
Organizations are not required by law to offer 401(k) or any other
retirement plans for that matter, but they do it just to attract
and retain good talent. Also, just because your employer offers
a 401(k) plan does not mean you are automatically eligible for contributions...
(View Full)
Why
You Should Always Contribute to Your 401k Plan...
(June 27th, 2009)
 Some
financial advisors recommend that during times of economic uncertainty
and recession, middle and low income class people should stop contributing
to their 401k plans altogether. We think this is totally misinformed
and the author of such articles do not know the tax advantages of
contributing to 401k plans, as well as the long term building of
wealth. Here are some of the reasons why you should always contribute
to a 401k plan, no matter what economic realm we are in... (View
Full)
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