401k Rules
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401k Rules Article Overview
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.
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401k Rules- Just the Basics
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 Rules- Worth your time to watch. 1min30secs
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401k Rules- Comments
Good information. The video was excellent. If you employer's 401k offers Vanguard Index funds, the cost is under .20 percent per year.
Another thought: It's not a good idea to invest any more of your 401k in the stock of your employer than you are required to do. And you shouldn't leave your 401k money in company stock any longer than you are required to hold it. Having your job and your savings tied to the fortunes of a single company is not a good idea.
401k plans offer a couple of important advantages: 1)Portability--if you change jobs you can take your 401k with you to your new employer or convert it to an IRA without incurring a taxable event. 2) Income tax savings--you don't pay taxes until you take the money out when you retire.
That is a great point. You should limit yourself in how much you invest in any one stock. Also, you should look into alternative retirement funding methods outside of just a 401k (such as a roth IRA). In general, I think it is always best to at least contribute the maximum to which your company will match.
My husband's 401k as well as his co-workers has been put on suspension. None of them are allowed to touch it (supposedly) for 6 months now- even if they are suffering any of the things the 401k plan lists as plausible reasons to pull funds out. My husband's 401k went from $23,000+ down to $15,000 & is STILL falling! The company claims they can't even STOP contributing to it. Is this true? Do they still have to allow (in my hubby's case) the company to (as far as I'm concerned) STEAL $30 - $50 dollars out of his check each week to "invest" is this ever DECREASING 401k? And if so- WHY? Why can't my husband stop payments into this LOSER of a 401k plan until it goes back up (if it ever does) so he can invest it in an interest bearing checking account or other more dependable sorce of fund of his own?
Am I still eligible for my 401k from a company I worked for 4 years ago?
Is this LEGAL?
I had money in The Honeywell Secured Benefit Plan, Number 222640650, which is a tax qualified plan under 401 of the Internal Revenue Code. Without proper notification, I have been wrongfully terminated from this plan, and have given a reduced amount to Prudential for an Annuity on Nov 28, 2008. The money in this plan is earning 12.3 % interest. By their withdrawing my money from the plan before the January 3, 2009 date, they have stolen thousands of dollars in interest from me.
On April 23, 2008, I was 70 years old. Knowing something about the IRS 70 1/2 rule, I called One Stop and talked to a reprehensive and asked about the procedure for getting the paperwork set up. I told the representative that I had money out of my 401K to meet the IRS withdraw requirement for the IRS 70-½ rule, so I did not have to take any money out of this account until January 3, 2009. She agreed that this was a good idea as it was earning 12.3%.
Now I don't know what I should do. Can you help me?
sporsfanX says:
2 years ago
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