403(b) plans, also known as tax sheltered annuities (TSAs), and 457 plans are quite similar to 401(k) plans. Both plans allow employees to defer income and benefit from tax deferred growth, and both plans enable employers to provide matching contributions. 403(b)s and 457 plans, like 401(k)s, have a 2009 contribution limit of $16,500 with an additional $5,500 “catch-up” contribution available to employees over 50 years of age. In most cases, withdrawals from both plans before the age of 59.5 will be subject to a 10% penalty. Finally, required minimum distributions (RMDs) are required from both accounts once the investor reaches …Read More
A 401(k) plan enables employees to defer receiving and paying taxes on a percentage of compensation. The salary reduction amount is deducted from the employee’s paycheck and contributed to a retirement fund, where it accumulates earnings tax-deferred until it is distributed. Tax-deferral is advantageous in that it reduces the employee’s annual tax liability, and pre-tax contributions to retirement accounts grow faster than post-tax contributions due to the effect of compounding.
To encourage employees to participate in a company 401(k), many employers make contributions to employee plans in addition to the employee’s contribution. The employer may make automatic contributions to all …Read More
Conventional wisdom has long told us that when we leave employment – either by taking another job, getting laid off, or retiring – it makes good sense to rollover our 401(k) plans to either an IRA or to our new employer’s 401(k) plan if that makes sense.
However – and if you read here much, you know there’s always a however in life – this decision isn’t as cut-and-dried as conventional wisdom leads us to believe. As with just about every financial decision we make, it’s not wise to go off willy-nilly without considering all of the benefits that we’re …Read More
If you were to get on the Internet and poll the financial gurus, the message you would get load and clear is: Save Money. No matter how much you’ve saved, you will be woefully short when you get to retirement.
The first suggestion of these pundits? Put money in your 401(k). (I will use “401(k) as a surrogate for all retirement savings plans: 401(k), 403(b), SEP, SIMPLE etc.) I’m not against 401(k)s. Actually, I’m a big fan. However, I think the advice is wrong.
Here’s my message: Save 10% of your income. Put your money in a savings account. …Read More