You Start the Week with Labor Day and End the Week with Retirement - Happy National 401 (k) Day!
First Friday after Labor Day – National 401(k) Day is a holiday dedicated to promoting retirement savings education.
September also happens to be the last month for employers to adopt a new Safe Harbor 401(k) plan for the current tax year. Many changes to current 401(k)s also need to be made prior to October 1st.
Contact us if you would like to discuss starting or changing a 401(k) or other types of retirement plans. Call 407.331.7330
Some Facts About 401(k)
- A 401(k), is named from the Internal Revenue Code that describes it. It is a tax advantaged savings account that can be funded by pre-tax payroll deductions.
- The funds can be invested in various stocks, bonds, mutual funds, and other assets, with capital gains, interest, or dividends not until they are withdrawn.
- 401(k)s were created to be supplements to pensions, but have since replaced pensions as the main form of retirement savings.
- The maximum amount that an individual can contribute to their 401(k) depends on their plan and salary, as well as government guidelines. The highest amount that can be placed into a 401(k) as of 2019, is $19,000 deferred tax-free into a 401(k). Those over 50 can defer an additional $6,000.
- Roth 401(k) option is now available in most plans. While you pay taxes on your contributed money, your account grows tax deferred and can come out tax free in retirement. This is a good option for those currently in a low tax bracket, expecting to be in a higher tax bracket when distributions are planned.
- Many 401(k)s have employer matching, where employers match a certain percentage of an employee's contribution to their 401(k). Another advantage of 401(k)s is there is a lot of flexibility as to how they can be invested, and employees have control of how their accounts are invested.
- 401(k)s are portable. If an employee has a 401(k) and moves to a new job, they can often leave their assets in their current plan, complete a 401(k) rollover into their new employer's retirement plan, or make a tax-free rollover to an individual retirement account (IRA). If you cash out your plan, taxes must be paid as well as a 10% penalty fee if you are younger than age 59.5. - not a financially smart move.
We can help determine which type of contribution is right for you; Pre-tax or Roth and what amount to contribute to maximize your plans benefits. Call us at 407.331.7330