Andrew
Admin
Cash: $ 467.10
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Joined: 02 Nov 2003
Location: Texas
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| 401(k) 101 |
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What is a 401k?
quote:
A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section.
The previous quote comes from U.S. Law: Title 26, Subtitle A, Chapter 1, Subchapter D, Part I, Subpart A, Section 401, which is where the 401k plan gets its name.
U.S. Law Section 401
In simplier terms, the 401k is a retirement plan in which employees are allowed to contribute money before taxes are assessed. Some employers also will provide matching funds to the employee's 401k account as part of their benefits package. The employee may have the option of selecting specific investment options for the money in their 401k account. Besides building retirement funds, contributing to your 401k reduces your taxable income.
Your 401k money is not taxed until you withdraw it, so if you've retired, you will likely be in a lower tax bracket which results in less money going to the tax man.
Since 401k contributions are typically made directly from your paycheck, saving for retirement is made easy. It is even possible to take out a loan against your 401k account balance, and the best part is that any interest that you would be paying on the loan won't go to a bank, it will be deposited into your account along with the repaid principal. Be sure that you are prepared to leave this money alone, since there is a 10% penalty for early withdrawal and you will be liable for the deferred income taxes.
More info on 401(k)s can be found here...
http://www.401k.com/
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Tue Nov 04, 2003 7:17 pm |
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Euler
Senior Member
Cash: $ 76.16
Posts: 404
Joined: 06 Nov 2003
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Yeah they call them 401K because it was established by IRS code section 401, line K.
That's my story and I'm sticking to it.
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Thu Nov 06, 2003 11:45 pm |
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Don Quixote
Contributing Member
Cash: $ 0.00
Posts: 34
Joined: 11 Nov 2003
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just glancing but feel compelled to note that a lot of people are being "hoodwinked" into investing in "annuities".
which are by far the worst investment that can be made, aside form the tax implications,fees and bonus' for the broker,they are a bad bad investment.
just another way for the evil insurance companies to make even more money.
just say no to annuities
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Tue Nov 11, 2003 1:29 am |
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Andrew
Admin
Cash: $ 467.10
Posts: 1717
Joined: 02 Nov 2003
Location: Texas
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Thanks for the tip, never knew that.
quote:
RiskLife.com
Investing your IRA, 401k, or 403b money in variable annuities is definitely not as good as investing your non-IRA (or non-401k, non-403b) money in variable annuities...
http://www.riskylife.com/insurance/annuityinira.html
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Tue Nov 11, 2003 1:52 am |
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Raecho
First Time Poster
Cash: $ 0.00
Posts: 1
Joined: 10 Feb 2004
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| To 401 or not? |
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I have recently started my own sole consultancy and it has been suggested that I open a 401k for myself. Any ideas or suggestions on this?
I currently have 2 old 401k's sitting idle from past employers with small sums in them. Should I look into moving these funds into my new 401k or an IRA or what?
Thanks.
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Tue Feb 10, 2004 6:17 pm |
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Andrew
Admin
Cash: $ 467.10
Posts: 1717
Joined: 02 Nov 2003
Location: Texas
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Hi Raecho,
Read this, if you haven't already...
401k Rollover
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Tue Feb 10, 2004 6:39 pm |
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