401(k) Retirement Planning

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Long gone are the times when people work 20-30 years at a job, though some still exist. Every time you change jobs you will need to do something with all the money you have been investing in your 401(k).

Most people just take the disbursement along with federal income tax penalty or roll it over into another account. We can help make sure that the money invested into your 401(k) is properly taken care of. Handling your own 401(k) distributions could trigger federal income tax penalties and it’s best to make sure that money you worked hard for isn’t lost to tax penalties.

Retirement plans 101

Types of defined contribution retirement plans
Defined contribution plans are a type of retirement plan that defines the contribution that an employer offers employees toward their retirement. Defined contribution plans can come in the form of a 401(k), profit-sharing, 403(b) or 457(b).

  • 401(k) plans – Profit sharing plans with added “cash or deferred arrangement” permitting eligible employees to contribute a portion of their salary. The following 401(k) plans may offer two types of employee contributions: traditional (pre-tax) or Roth (after-tax).
  • Traditional 401(k) – Employers may contribute either matching or non-elective amounts to the plan on behalf of eligible employees. Employer contributions may be tax-deductible, and employee contributions may be excluded from current income for federal income tax purposes.
  • Safe Harbor 401(k) – A traditional 401(k) that may be exempt from certain non-discrimination tests and/or top heavy rules, provided requirements are met regarding contributions, vesting and information provided to employees.
  • Owner-Only 401(k) – A 401(k) plan for independent professionals and their spouses.
  • SIMPLE 401(k) – A simplified version of a traditional 401(k) with no discrimination or compliance testing.
  • Profit Sharing Plan – A defined contribution plan in which the contributions are made solely by the employer.The business owner has the flexibility to contribute and deduct a percentage of an eligible participant’s compensation up to a maximum each year.
* A rollover of retirement plan assets to an IRA is not your only option. Carefully consider all your available options  which may include but not be limited to keeping your assets in your former employer’s plan; rolling over assets to a new employer’s plan, or taking a cash distribution (taxes and possible withdrawal penalties may apply).  Prior to a decision, be sure to understand the benefits and limitations of your available options and consider factors such as differences in investment related expenses, plan or account fees, available investment options, distribution options, legal and creditor protections, the availability of loan provisions, tax treatment, and other concerns specific to your individual circumstances.

In a recent study conducted by research firm AB, it was found that 70% of current 401k plans are violating DOL guidelines in several areas.  Contact us for a complimentary assessment.