Did you Have Better Plan more than 401k contributions.

Did you Have Better Plan more than 401k contributions.

It is becoming more common for retirement plan sponsors to offer separate accounts within their retirement plan. These are often called optional or self-directed accounts.

Typically this means the plan provider has an agreement with another institution that offers more comprehensive brokerage services that allows plan participants to open a separate account to invest part or all of their 401k contributions 403(b) assets.

So what this means is that you are able to continue your salary deferral and rather than only having the 10 or 20 investment choices typically available to you there are ultimately all of the great index and no-load funds you have grown to love now at your disposal.

Generally there is a small catch to these 401k contributions accounts.

1. It isn’t likely to be free. Most of these accounts carry with them an annual fee to maintain the account. I have seen fees anywhere from $10 to $50 annually. This may not be much of a concern considering the money you are likely saving in fund expenses.

2. Catch is that these accounts typically do not allow for investments in every fund company or even individual stocks. While they do typically include all of the large fund companies and most funds you have heard of you want to be sure you check with the provider to ensure you have the investment choices you are interested in available to you.

If your 401k contributions employer’s plan doesn’t have the best options available it may be worthwhile to check with your plan provider to see if this is a feature available to you. What I wouldn’t do is simply stop by your HR department to check for this information.

Generally the HR people only cover the vary basics regarding the plan unless you have a dedicated on-site representative for the plan. Check your statements or online for an 800 number and see if there is a way to talk to someone regarding your plan options specifically.

Even if you know this 401k contributions was not offered when you were hired a few years back it is still wort hing checking into. They may have added this benefit since then, yet it is unlikely they sent out a letter to everyone promoting the feature. At best it was in the fine print on one of your quarterly statements.

How much money Rollover Into New Employer’s 401(k)

How much money Rollover Into New Employer’s 401(k)

If you find new employment and they also offer a retirement plan such as a 401k or 403(b), in most cases they will allow rollovers into your new account. But is this a good idea?

The benefit of rolling into your new employer’s 401k saving plan is that it doesn’t matter how much money you have since there are generally no investment minimums on the fund options.

If your rollover isn’t that much, you may find that you don’t have enough money to properly diversify your money with a particular mutual fund company.

In some cases, you need a minimum investment of $3,000 just to invest in a single mutual or index fund at a fund company.

If your 401k saving plan balance is low, say $5,000, it will be harder to diversify that money than if you were to move it into the new 401k saving plan where you could spread the money out regardless of how much you have to invest.

Aside from that primary benefit, there are also plenty of drawbacks. First, is that you’re losing a lot of flexibility.

Remember, these are employer-sponsored accounts, so as long as you’re an active employee, you’re bound to that plan and its rules.

This means you’ll be stuck with whatever investment choices they offer, and will not have access to your funds again unless you want to take a loan (if it’s allowed) or you terminate employment.

In addition, a lot of 401k saving plan have relatively high fees. This is especially true for smaller employers.

You could find that you’re paying on average 1% or more for each investment when you could easily find a comparable investment outside of the plan for half that.

How to purchase with 401k debit card.

How to purchase with 401k debit card.

With the ReservePlus 401k debit card, people can simply carry their 401k contributions in their wallet or purse and swipe it whenever they want to make a purchase and have instant access to that money.

This is dangerous on so many levels. First, the time that it took to apply for a traditional loan gives people time to think twice about their decision.

If they know that they it may take a week or more to get the funds, they are not as likely to take the loan for instant gratification purposes.

With that money at their fingertips, it is easy to simply tell yourself that you’ll just use that 401k contributions money now and pay it back right away when the bill comes.

This is the same trap people fall into with 401k credit card spending problems where they want to make the purchase right now, and while maybe having good intentions of paying it off right away, find themselves dragging the payments out for months or years.

The second major drawback comes from the way repayment is handled–direct monthly statements to the employee.

While Reserve Plus cites this as a benefit, I have to disagree. If someone needs to borrow from their retirement plan in the first place, it is probably because they don’t have the money available elsewhere.

If that is the case, is it really likely that they are are going to have the money and discipline to continue making the monthly payments?

At least with a traditional loan the payments are withheld through payroll, so they have no choice but to make the payments.

Which option is better: A 401k contributions or your new employer's plan?

Which option is better: A 401k contributions or your new employer's plan? Assuming that your new employer offers a retirement plan that will accept rollover contributions, is it better to roll over your 401k contributions funds to the new plan or to a traditional IRA? Each retirement savings vehicle has advantages and disadvantages. Here are some points to consider: A traditional IRA can offer almost unlimited investment options; a 401k contributions plan limits you to the investment options offered by the plan it offers easier access to retirement funds than a 401k contributions and it can be converted to a Roth IRA if you qualify. 401k contributions may allow you to borrow against the value of your account, depending on plan rules. 401(k) offers more flexibility if you want to contribute to the plan in the future Finally, no matter which option you choose, you may want to discuss your particular situation with a tax professional (as well as your plan administrator) before deciding what to do with the funds in your 401k contributions.

How to Take money from 401k plan.

How to Take money from 401k plan.

• When you leave your current employer, you can withdraw your 401(k) funds in a lump sum. To do this, simply instruct your 401(k) plan administrator to cut you a check.

• Then you're free to do whatever you please with those funds. You can use them to meet expenses, put them toward a large purchase or invest them elsewhere.

• While cashing out is certainly tempting, it's almost never a good idea. Taking a lump sum distribution from your 401(k) can significantly reduce your retirement savings, and is generally not advisable unless you urgently need money and have no other alternatives.

• Not only will you miss out on the continued tax-deferred growth of your 401(k) funds, but you'll also face an immediate tax bite.

• First, you'll have to pay federal (and possibly state) income tax on the money you withdraw. If the amount is large enough, you could even be pushed into a higher tax bracket for the year.

• If you're under age 59½, you'll generally have to pay a 10 percent premature distribution penalty tax in addition to regular income tax, unless you qualify for an exception.

• For instance, you're generally exempt from this penalty if you're 55 or older when you leave your job.

• And, because your employer is also required to withhold 20 percent of your distribution for federal taxes, the amount of cash you get may be significantly less than you expect.

• Because lump-sum distributions from 401(k) plans involve complex tax issues, especially for individuals born before 1936, consult a tax professional for more information.

What makes an individual 401(k) plan attractive?

What makes an individual 401(k) plan attractive?

One feature that makes an individual 401k plan an attractive retirement savings vehicle is that in most cases your allowable 401k contributions to an individual 401k plan will be as large or larger than you could make under another type of retirement plan.

• With an individual 401k plan you can elect to defer up to $15,500 of your compensation to the plan for 2008 ($20,500 if you are age 50 or older by the end of the calendar year), just as you could with any 401(k) plan.

• In addition, as with a traditional profit-sharing plan, your business can make a maximum tax-deductible contribution to the plan of up to 25 percent of your compensation.

  Because the amount of compensation deferred as part of a 401(k) plan does not count toward the 25 percent limit, you, as an owner-employee, can defer the maximum amount of compensation under the 401(k) plan, and still contribute up to 25 percent of total compensation to the profit-sharing plan on your own behalf.

• Total plan 401k contributions for 2008 cannot, however, exceed the lesser of $46,000 or 100 percent of your compensation (plus any catch-up 401k contributions if you're 50 or older).

• These 401k contributions possibilities aren't unique to individual 401(k) plans; any business establishing a regular 401(k) plan and a profit-sharing plan could make similar contributions. But individual 401k plan are simpler to administer than other types of retirement plans.

• Since they cover only a self-employed individual or business owner and his or her spouse.

  Individual 401k plan are not subject to the often burdensome and complicated administrative rules and discrimination testing that are generally required for regular 401(k) and profit-sharing plans.

Growth and Tax Relief Reconciliation Act of 2001 (2001 Tax Act), 401k contributions had to be counted toward the business's maximum profit-sharing contribution (which was itself limited to 15 percent).

Factors influencing the optimal replacement rates for retirement.

Factors influencing the optimal replacement rates for retirement.

The survey finds that 75% are median optimal coverage for married couples - apparently confirmed by gold standard rules often used in budget planning retirement.

However, the study says, as is often the case, the average errors represent the wide variation in optimum replacement rates for households in different situations.

Replacement rates for a married couple has to be larger than a single person otherwise identical, both because of the few higher health care costs in retirement, and because of the increased life expectancy of at least a partner.

While the study found that the median optimal rate for married couples to 75%, the average individual 401k optimum rate was 55%.

Replacement rates for low-income individual 401k and families would be higher than the rates for high-income individuals and families, due to a reduction on savings and taxes in retirement will be lower for low income individual 401k and families.

High income need less coverage than low-income households due to the significant reduction in the average effective tax rates. Of course, the opposite applies the point: if you expect future taxes to increase replacement rates optimal destination for high-income households should reflect these expectations.

A household with many children have a lower penetration of a home without children, because a couple with children when pensioners will be much lower costs of raising children than they did at work. Other factors affecting retirement optimum coverage.