Archive for the ‘401(K) Plans’ Category

Understanding a 401K

Friday, June 13th, 2014

Understand a 401K

When you are considering ways to save for your retirement, one of your options is a 401K plan. You may have heard the term thrown around in different conversations, but do you understand how it works or where it came from?

The 401K

The 401K was developed after the Tax Reform Act was passed by Congress in 1978. The act was passed to encourage working individuals to save money for their retirement while having a way to lower their federal and state taxes in the process. The name for the 401K came from its Internal Revenue Code-section 401 and paragraph K. A benefits consultant named Ted Benna created a plan for the 401K in 1981. In 1991, final regulations were published for the 401K plan.

Some of the benefits you receive with a 401K include a lower taxable income, earnings and savings without the need of deposits, and free money from employers. When you begin a 401K, you first tell your employer how much money you wish to have entered in your account. This amount can typically be about 15% of your salary; however your employer does have the option to put a limit to the amount. That money is then entered into your account before taxes are withdrawn. There are also times where your employer will match what you decide to contribute to the 401K. Your money is placed in the hands of an administrator of a third party to be invested in a number of different ways. You can decide which ways to invest your money between bods, money market accounts, and mutual funds, along with other options. There are online calculators like this one that will help you understand how much money your can accumulate depending on how long you have a 401K and how much you decide to contribute to the account.

Your 401K with Safe Retirement Solutions

 

At Safe Retirement Solutions, we are here to help you plan your retirement. We know that the idea of retiring is daunting and there is a constant fear of outliving your retirement funds. One of our trained and educated advisors can meet with you to decide which options are best for you and how to begin with a 401K.

Want to get started with a 401k? Do you have questions about retirement? Give Safe Retirement Solutions a call today at 410.266.1120 or click here. We serve the residents of Annapolis, Towson, and Columbia, Maryland as well as the residents of Saint Augustine, Florida.

You can also follow Safe Retirement Solutions today on Facebook, Twitter, LinkedIn, and Google+.

 

Source:

http://money.howstuffworks.com/personal-finance/retirement-planning/401k.htm

 

How Does A 401k Work?

Monday, March 24th, 2014

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).
Safe Retirement Solutions in Towson is dedicated to providing you with the very best in retirement income planning!

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.

You can also follow Safe Retirement Solutions on Facebook and Twitter.

What Are Common Mistakes With My 401K?

Monday, December 2nd, 2013

401K plans may seem like an esoteric language to some people. If plans are not efficient enough, than its easy to make a mistake. Oft-times mistakes can be corrected easily if you are able to catch them ahead of time. Other times, mistakes may hold punitive damages if you don’t notify the IRS.

By following these steps, you’re 401K plans will be safeguarded against future blunders.

Common Mistakes and How to Correct them

1.)  Make sure your documents are updated every year. Documents that don’t get updated to reflect EGTRRA changes within the past few years may be fraught with problems for you in the future.

2.) Make sure you follow all terms of your plan. Failure to follow the terms of the plan can result in irreversible damages. Notify your third-party-administrator about these changes or this will end up in your audit.

3.) If the  definition of compensation for all deferrals and allocations is not defined then fix that immediately. Remember to apply the proper definition in accordance to your plan document.

4.) Terms of the plan must be followed when allocating employer matching contributions. If contributions are mismatched then make sure you align your terms accordingly.

5.) Make sure your plan satisfies yearly nondiscrimination tests. Failure to do so can spell out trouble for your 401K plan.

6.) Lastly, participant loans must conform to the requirements of the plant document and IRC-72.

These are just few of many precautions that must be taken when it comes to maintaining your 401K plan. If you need help with your 401K Plan, then consider Safe Retirement Solutions. We know how to fix any concerns you may have with your plan.
For more information about Professional Financial Planning, or for professional financial advice, consult the financial advisors 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.You can also follow Safe Retirement Solutions on Facebook and Twitter.

Common 401(K) Mistakes

Monday, October 21st, 2013

If you have not already begun to plan for your retirement, one of the simplest ways to do this is to utilize your company’s 401 (k) retirement plan. If you have already started paying into a 401 (k), you need to make sure you are not committing any of the following major 401 (k) mistakes.annuities

1. Too Much Company Stock: Having too much company stock is a huge risk. Not only have you bet your retirement savings on the success of a single company in less than stable economic times, but too much company stock can actually hurt your returns. In fact, portfolios with more than 1/5 in company stock can expect to accumulate 18% less retirement wealth over 20 years than a portfolio with less than 10% in company stock.

Diversify your retirement funds beyond the company you work for.

2. Inappropriate Risk: While older workers put too much stock in stocks, younger workers tend to have too much money in bonds. This is a big problem with workers earning $25k or less. These individuals tend to have portfolios with inappropriate risk or diversification. Undiversified portfolios with inappropriate risk may have 22 percent less projected retirement wealth over a 20 year period.

3. Not Contributing: A third of active 401 (k) participants fail to contribute enough money to get the full company match, while sixty percent did get the full employer match but are saving below the limits allowed by the IRS or the plan.

Only 7 percent of active 401(k) participants came within $500 of the IRS or plan maximum and thus received the full tax break.

To ensure that you are making wise retirement decisions, consult a financial adviser, like Safe Retirement Solutions. Safe Retirement Solutions is your full service, independent financial advisory firm dedicated to providing you with the very best in retirement income planning.

If you have any questions about what you have just read, or if you would like to know more about retirement planning, consult a financial advisor like Safe Retirement Solutions by calling 877-268-4086 or visit our website today!

We 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.

You can also follow Safe Retirement Solutions on Facebook and Twitter.

Sources:

3 Mistakes to Avoid With Your 401 (k)

401(k) Field Guide from Towson Financial Advisor

Monday, August 12th, 2013

Want the 411 on 401(k)s? We’re here to offer it. Signing up for a 401(k) is like signing up for free money in the bank, and in fact, the more money you put towards it, the more no-bars cash will wind up in your pocket. Here are the top three most miraculous money-making aspects a 401(k) has to offer:

-       Whatever you put towards your 401(k) gets taken out of your paycheck before taxes are withheld, meaning you get an instant tax break and decreasing your overall taxable income.

-       Many employers will match at least part of what you put away in your 401(k). The standard offer is 50 cents to every dollar for the initial 6% invested.

-       Until you withdraw your investment, you wont have to pay annual taxes on capital gains, dividends, and other distributions. This is known as tax-deferred growth.

What’s more? As of the 2012 tax year, the federal cap on contributions is $17,000. In addition, under the Tax Relief Act, workers aged 50 and older are permitted to play catch-up, contributed up to an extra $5,500 each year to their 401(k). That being said, individual employers may have different restrictions on the amount of contribution – check with your benefits team to determine how much you can put away every year. Also be sure you’re aware of how much time you have to put in at a company before you can walk away while still gaining your employer’s contributions.

One important consideration: withdrawing money prematurely from your 401(k) does not come without penalties. Access your cash before the age of 59 ½ and you’ll have to pay income taxes on whatever you take out, plus a 10% penalty.

The Maryland financial advisors at Safe Retirement solutions in Towson can help you make the most of your 401(k) and educate you on the ins and outs of this savings system. For more information, call 877-268-4086 or visit our website today!

Follow us on FacebookTwitter, LinkedIn, and Google+ for more retirement planning tips.

Sources:

Retirement: Virtues of the 401(k)

What Is a 401K?

Tuesday, July 16th, 2013

A 401k gets a lot of attention. When it comes to saving up for retirement, it seems that everyone is concerned about making sure that they have a 401k. What exactly is a 401k?

In short, a 401k is a retirement plan that your employer sponsors. Workers are allowed to save and invest a portion of their paycheck before taxes are taken out. The money saved is used when the employee retires.

There are specific rules and stipulations regarding a 401k. Such as, you cannot access the money immediately; you must work for your employer for a certain amount of time before gaining access to what they contribute to your 401k. Additionally, there are penalties for withdrawing funds before your retirement.

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.

For more information about Estate Plans, or for professional financial advice, consult the financial advisors at Safe Retirement Solutions by calling 877-268-4086 or visit our website today!

You can also follow Safe Retirement Solutions on Facebook and Twitter.

Source:

http://guides.wsj.com/personal-finance/retirement/what-is-a-401k/

How Much Can I Contribute to my 401(k)?

Friday, March 8th, 2013

As we’ve discussed before when giving the 411 on 401(k)s, these retirement savings funds are an easy way to grow the money you set aside for life after the workforce. That’s because many employers will match at least part of what you put away in your 401(k). But exactly how much can you save each year in these plans? Our recommendation is as much as you can, since this money gets taken out of your paycheck before taxes are withheld, decreasing overall taxable income.

Currently, you can contribute up to $17,500 to your 401(k) annually. If you’re over the age of 50, you may qualify for an additional $5,500, bringing the total up to $23,000.  Each year, contribution limits are adjusted in order to account for inflation, which decreases the value of the dollar over time. What this means in planning for retirement is that you have to put more money into your savings in order to have the same purchasing power.

The best way to save with a 401(k) is to contribute as much as you need to in order to qualify for your employer’s highest matching contribution percentage. Work with your company’s human resources department to determine how much you need to contribute to get the best possible match that you can, thereby maximizing your retirement savings.

For more information about retirement planning and consultations in and around Baltimore, Maryland, call 877-268-4086 or visit our website today!

Follow us on FacebookTwitter, LinkedIn, and Google+ for more retirement planning tips.

Retirement 101: How Do 401(k)s Work? Tips from Baltimore Financial Advisors

Friday, February 22nd, 2013

401(k)s are a staple of retirement saving and planning, but how do they work? Let us explain. With a 401(k) plan, you can either choose to receive cash payments from your employer in real time, or defer receiving a portion of your income to be placed in the retirement plan. The money that you defer is known as elective deferral or pretax contribution, and is made up of pretax dollars, rather than being a part of your income. This means that your yearly taxes are reduced, since the money placed in a 401(k) isn’t taxed until you begin receiving payments from the plan.

Here’s an example. Say you make a salary of $30,000, and contribute $4,500 of that money annually in your employer’s 401(k) before taxes. The amount of income you earn that is subject to being taxed is $25,500, since the deferred money isn’t taxed until distribution is received.

The Maryland financial advisors at Safe Retirement solutions in Baltimore can help you make the most of your 401(k) and educate you on the ins and outs of this savings system.

For more information about retirement planning and consultations in and around Baltimore, Maryland, call 877-268-4086 or visit our website today!

Follow us on FacebookTwitter, LinkedIn, and Google+ for more retirement planning tips.

Recap on a Study of Bull Markets and Retirees: Annapolis, Maryland Retirement Advisor

Saturday, November 17th, 2012

During bull markets – times of increased investor confidence and anticipated capital gains – make people more prone to retire, but abandoning employment during peak economic times can create financial strain down the line for retirees.

At least, that’s what can be gleaned from a recent study performed by researcher Rui Yao, professor of personal financial planning at the University of Missouri and published in the Journal of Personal Finance. Yao examined the financial and retirement statuses of over 4,000 American households spanning the period from 1992 to 2008 that included retirement aged individuals. The data demonstrated that for every 1% yearly increase in market returns, there was a 2% increase in the probability of a retirement aged individual calling it quits at work.

Yao attributes the correlation between a better economy and the decision to retire in part to the fact that potential retirees are able to more swiftly reach their savings goals while money isn’t tight. But retiring immediately after reaching said targets can cause financial problems later in life, especially because with the cyclical nature of the economy, after a peak, the market is likely to take a downfall.

Economic turns for the worse can create substantial loss for stock-based retirement funds like 401(k)s and IRAs – a problem in particular for those who retired when only barely meeting their savings needs.

Rather than risking outliving retirement funds and dealing with worry over finances during what is supposed to be the golden years of relaxation, it is better to continue saving even when the market is doing well to develop a cushion that can usher retirees through potential economic downturns.

In order to plan for retirement and pad your savings for the future, consider consulting with a professional financial advisor. Safe Retirement Solutions services the Annapolis, Maryland and surrounding areas, preparing clients for their retirement years, handling such details as the planning of income distribution, tax benefits and deferrals, and the general security of their nest egg.

For more information about Saving for Retirement and our services or for professional financial advice, consult the financial advisors at Safe Retirement Solutions by calling 877-268-4086 or visit our website today!

You can also follow us on Facebook, Twitter, LinkedIn, and Google+!

Sources:

Booming Economy? Better keep working

Trends in Retirement Planning: Saving Trumps Investing

Monday, October 15th, 2012

Investments have long been a part of the process of retirement planning. As the profitable cousin to saving, investments have helped to garner supplemental income for people post-workforce as they settle down for life without a full-time job. With the economic downfall, however, recently, savings has become the underrated and yet highly valuable family member, as investments have made a dive for the worse.

Though many Baby Boomers may be making this discovery a little too late, younger generations have been proving to alter their lifestyles accordingly. Between 2003 and 2011, the number of employed adults under the age of 25 contributing to their 401(k) plans increased by nearly 50%, according to Strategic Business Insight’s MacroMonitor. And in order to put money away in the bank, this younger set is making some economical decisions, driving older cars, paying off debts as quickly as possible, and saving at high interest rates.

Because of these shifts in the way retirement preparation is conceived, Wall Street professionals and financial planners everywhere will have to make changes that mirror the ones popping up around retirement planning. That is, they will have to adjust from providing advice about selling products to advice about saving money for financial peace of mind in the future. In essence, guaranteed money, even if of a lesser total sum, has become more important than the potential profits reaped from hypothetical and risky investments; security is key.

The trend in stock and bond obsessions came about in the late 70s, when Wall Street transformed from small partnership firms into global institutions – before that, investments were fairly conservative and planning for the future centered around saving. The Great Recession has ushered this more cautious trend in retirement saving back into style.

The professional advisors at Safe Retirement Solutions are happy to help you figure out how to cut costs and maximize savings in order to align with the current recommendations and directions of retirement planning.

For more information about Saving for Retirement and our services or for professional financial advice, consult the financial advisors at Safe Retirement Solutions by calling 877-268-4086 or visit our website today!

Source:

The New Retirement Plan: Save More, Invest Less