401k Rules

This article will tell you the basic 401k rules you should know. This is a beginner's guide to 401k rules and you should put more time into reading about 401k rules to be more proficient.

401k Eligibility Rules

A 401k rules plan is just a tax-deferred compensation retirement plan. That means you choose to give a percentage of your paycheck into the 401k plan as a pre-tax contribution. According to 401k rules, this is a tax-deferred compensation retirement plan called a 401k which becomes a tax shelter for your investments. 401k rules state that assets placed into a 401k plan can continue to compound at a tax-deferred status until the proceeds are used at retirement.

401k rules state there are eligibility rules that can be triggered on 401k owners:

• Members that haven't turned twenty-one may not be eligible according to 401k rules.
• Members may have to work at the company for one year before being eligible.
• Members covered by a collective bargaining agreement and decided, as a group, to not participate in a 401k plan, compliant with 401k rules.

401k Contribution Rules

In 2007, 401k owners are allowed to contribute the following, according to 401k rules:

• In 2007, the total contribution that an employee can make on a pre-tax basis is limited to $15,500.
• In 2008, 401k rules state it remains at $15,500

Keep in mind, this $15,500 applies to your maximum contributions on ALL retirement accounts (this includes if you have contributions to IRA accounts).

These are very basic 401k rules and I highly recommend you spend more time later on learning more advanced 401k rules. However, these simple 401k rules above should give you the basic knowledge needed to confidently start contributing to your employer's 401k plan.

401k-ira.org