What is a 401k plan?

A 401k plan is a plan that allows employees of qualified companies to save money for their retirement on a pre-tax basis. Some employers choose to make matching contributions to their employees 401k plans. The 401k plan is named after section 401(k) of the Internal Revenue Service Code.

What are the benefits of a 401k plan?

• Tax Savings - Money contributed to your 401k plan is taken out of your paycheck before taxes. This lowers your gross income in turn lowering your income tax.
  
• Greater Investing Power - Your investing power is greater because money is contributed to your 401k plan on a pretax basis.
  
• Tax-Deffered Investment Growth - Money contributed to your 401k plan in most cases is not taken out until you are 59 1/2. Since you do not pay taxes until you begin taking distributions your investments can accumulate faster than if you were paying taxes year by year. Once you begin taking distributions, each distribution is taxed as it is taken out.
  
• Flexible Investment Options - 401k plans offered through Associates in Excellence allow for a wide variety of investment options to suit your needs. For more information please contact us.
  
• Professionally Managed - Associates in Excellence professionally manages 401k plans; keeping track of your contributions and investments. With our daily valuation system plan participants can monitor and change their investments on a daily basis.

When can I take money out of my 401k plan?

At 59 1/2 you can begin taking distributions from your 401k plan. If you need to withdraw money prior to 59 1/2 you will incur penalties and be subject to taxes. Some 401k plans allow you to take a loan out against your 401k to avoid these penalties and taxes.

What happens to my 401k plan if I change employers?

Depending upon your employer and plan you may be able to keep your plan with your former employer. You may also be able to transfer your old plan into your new plan or into a rollover IRA (Individual Retirement Account).