401K Plan Facts
These 401k plan facts can help your 401k planning or just simply give you some great 401k info. You may need it to plan or simply may want to learn some more before investing. Contributing Contributing money to the plan is the first step. Here is some 401k info on that. • There is an ever changing 401k maximum contribution that you must not exceed every year you are investing into the plan. • If you go over the maximum contribution the money will be taken out by April 15th of the next year and will be charged a penalty as well as taxes. • If you are over 50 you are eligible to contribute more money to “catch up” • Contributions are taken directly out of your paycheck and deposited into the plan What are my options to cash out my 401k? Here are some different 401k plan facts on withdrawing money. • Anyone who cashes out of their plan before the age 59 ½ will have to pay an early withdrawal penalty in addition to taxes. • Mandatory Distributions begin on April 1st in the year you turn 70 ½ • Some plans allow you to automatically receive 401k distributions every month until the money runs out. • A 401k loan may be taken out at any time from your 401k and will not be charged taxes or early withdrawal penalty provided you pay it back. • 401k loans that are not paid back are considered withdrawals 401K Hardship Withdrawals There are some 401k plan facts that allow you to take money out of the plan before you reach the age 59 ½. You can take advantage of the 401k hardship withdraws if you fit into one of these categories. • You have died, in which case your beneficiaries can take the money out • You have recent medical bills that exceed 7.5% of your income • You or your immediate family needs help paying a college tuition • You need help buying your first home • You need help with funeral expenses
Managing 401k plans Managing your plan is going to be one of the most important aspects of the plan. After all, the whole idea of investing it into a retirement plan is to have it grow. • Most plans are managed for you by a professional • Some employers allow you to direct your own 401k plans, but those who do normally limit your options to just mutual funds. Self employed 401k plans also known as Solo 401k plans allow the self employed to take advantage of this tax deferring plan as well. If you own a small business and want to save money for retirement it is something to look into. Here is some 401k info about Solo 401k plans. • To qualify you must own a small business that makes money. • To qualify you must not have any employees in the business other then yourself or your spouse. • Solo plans allow business owners to deposit up to 25% of their income in addition to the standard 401k contribution limit that regular plans have. • Solo 401k plans may be used alongside regular 401k plans provided the combined contribution to both plans does not exceed $49,000. Interesting Facts In addition to all of the “business facts” around here, there are also some interesting 401k plan facts to know about. These probably will not help your 401k planning goals, but they are still pretty interesting. • The 401k is a spin off from the Defined Contribution or DC plans • 401ks were created on November 10, 1981 • 401k does not stand for anything, the name taken from the Revenue Code Section 401 • Over 65 million Americans contribute to a 401k • The 401k is the most widely held retirement account in the US • Every 401k plan must pass a Discrimination test once a year to assure that it is not favoring the “Highly Compensated Employees” Return From 401k Plan Facts to 401k Information
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