Ok, so you have heard of a 401(k) plan before. You kind of know what it is supposed to do, but you are not quite sure at how it works. Luckily for you, the financial specialists at Safe Retirement Solutions in Towson are here to help!
What is a 401(k) Plan?
401(k) plans is actually the slang term for qualified cash or deferred arrangements (CODAs) permitted under Section 401(k) of the Internal Revenue Code.
How do 401(k) Plans Work?
401(k) plans have become one of the most popular types of employer-sponsored retirement plans, but how do they work?
With a 401(k) plan, you elect to defer a portion of your wages, contributing that amount to your plan. The amount you defer, known as an “elective deferral” or “pretax contribution,” isn’t included in your income. This tax-deferred portion – along with any other investment earnings – isn’t taxed to you until you receive payments from the plan.
How much Money can I contribute to my 401(k) Plan?
There’s an overall cap on your combined pretax and Roth 401(k) contributions. These include:
- You can contribute up to $16,500 of your pay ($22,000 if you’re age 50 or older) to a 401(k) plan in 2011.
- If your plan allows Roth 401(k) contributions, you can split your contribution between pretax and Roth contributions any way you wish.
- If you also contribute to another employer’s 401(k), 403(b), SIMPLE, or SAR-SEP plan, your total contributions to all of these plans—both pretax and Roth—can’t exceed $16,500 ($22,000 if you’re age 50 or older).
It’s up to you to make sure you don’t exceed these limits if you contribute to plans of more than one employer. If you need help with your 401K Plan or any other financial investments, then consider Safe Retirement Solutions. We are here for you!
For more information about 401(k) Plans, Professional Financial Planning or Financial Advice in Towson, consult the financial advisers at Safe Retirement Solutions by calling 877-268-4086 or visit our website today!
Safe Retirement Solutions’ financial advisers help our clients in all phases of their retirement planning. We help them prepare for a retirement free from financial worries, so that they can enjoy their retirement years. We help to enable our retired clients with the transition of their wealth into a carefree income that will last them a lifetime.