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The 401K Account As A Novel Savings Vehicle

Comments Off on The 401K Account As A Novel Savings Vehicle 03 August 2011

A 401K plan is a savings plan that is designed to mature at a persons retirement. It was introduced to American workers in the 1980s and eventually became an alternative to the regular retirement plans. There are currently three different types of 401K plans offered by employers.

If employees need to access any of their funds before the age of 60, there is a chance that they will be assessed penalties and fines. Because the account is set up to mature at a certain time, early withdrawal is discouraged. In particular, those who know about selling annuities would realize that the 401K actually has tax benefits.

Money that is put into a 401K is not taxed until it is taken out at retirement. Should an employee plan on taking the money out in the future, it is a good idea to put away the amount of taxes that will be charged in order to financially prepare themselves.

Some employers have a fund matching program in place to help employees save more for retirement. With an employee-directed plan the employee has a say in where the money they invest goes, this includes the employer contribution. With a trustee managed plan the employer makes all the decisions.

As soon as an individual hits the age for retirement they must start to distribute the funds in their account. The age most people start to withdraw funds is around 70. If an employee is still working at this time exceptions can be made. It is recommended to seek help from a professional if you need help with the disbursement.

When a person is no longer employed by the company that holds their 401K, they can choose to roll it over or cash out. The roll over option is not always available at all places of employment so it is recommended that employees ask. If a cash out is chosen, the minimum balance must be at least 1,000 dollars or the funds can be forfeited.

This site talks about how to choose compare annuities.

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