Can any one write about 401(K) contributions

Question

I need information about the 401(K) contributions

Answer 1

What is it?

401(k)s got their start back in 1978, when the IRS established a new provision to allow employees to defer some of their compensation into an account with their employer. The beauty is that in many cases,

your employers will match your contributions to a certain point. Employer matches come in a wide variety of options depending on the employer’s discretion. Some employers match contributions dollar for

dollar.  Others match 25 or more cents on the dollar. That means each time you contribute, your employer adds money, for free! Often times your employer will only match up to a certain percent of your salary. But regardless, they’re adding to your retirement for you!

When you first enroll in a 401(k) plan, you’ll be given a list of investment options.It’s best to sit down with a financial professional and figure out how you wish to invest your money. Your options for investments will vary from conservativefixed income investments to aggressive stock portfolios. You are able toallocate your money into investments in different combinations depending on how much growth you want to achieve, and how much risk you can tolerate.

Benefits of a 401(k)

All the contributions you make to your 401(k) are on a pre-tax basis. By deferring money to your 401(k) before taxes, you not only avoid paying taxesnow, but you reduce the amount of taxable income that Uncle Sam can take. You will have to pay federal and state income taxes when you withdraw fromyour 401k, but there’s always a chance you’ll retire in Florida, or another state which doesn’t have a state income tax. According to the IRS, those states,

besides Florida, include: Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

Answer 2

www.401k.org

Answer 3

You can get that information at www.irs.gov

Answer 4

The 401(k) plan is a type of employer-sponsored defined contribution retirement plan under section 401(k) of the Internal Revenue Code (26 U.S.C. § 401(k)) in the United States, and some other countries.

A 401(k) plan allows a worker to save for retirement while deferring income taxes on the saved money and earnings until withdrawal. The employee elects to have a portion of his or her wage paid directly, or "deferred," into his or her 401(k) account. In participant-directed plans (the most common option), the employee can select from a number of investment options, usually an assortment of mutual funds that emphasize stocks, bonds, money market investments, or some mix of the above. Many companies' 401(k) plans also offer the option to purchase the company's stock. The employee can generally re-allocate money among these investment choices at any time. In the less common trustee-directed 401(k) plans, the employer appoints trustees who decide how the plan's assets will be invested.

Some assets in 401(k) plans are tax deferred. Before the January 1, 2006 effective date of the designated Roth account provisions, all 401(k) contributions were on a pre-tax basis (i.e., no income tax is withheld on the income in the year it is contributed), and the contributions and growth on them are not taxed until the money is withdrawn. With the enactment of the Roth provisions, participants in 401(k) plans that have the proper amendments can allocate some or all of their contributions to a separate designated Roth account, commonly known as a Roth 401(k). Qualified distributions from a designated Roth account are tax free, while contributions to them are on an after-tax basis (i.e., income tax is paid or withheld on the income in the year contributed). In addition to Roth and pre-tax contributions, some participants may have after-tax contributions in their 401(k) accounts. The after-tax contributions are treated as after-tax basis and may be withdrawn without tax. The growth on after-tax amounts not in a designated Roth account are taxed as ordinary income.