Questions & Answers
What is a
401(k) retirement savings plan?
401(k) is the section of the Internal Revenue Code that allows employees
to participate in a retirement savings plan. Contributions are
tax-deferred, and interest and earnings accumulate on a tax-deferred
basis. A 401(k) retirement savings plan is an effective and powerful
method of savings.
Why should
I contribute to a 401(k) retirement savings plan?
There are five great reasons
to contribute to a 401(k) retirement savings plan:
-
You can save for
future financial needs through convenient payroll deduction
-
You can reduce your
current tax obligation, because federal and most state income taxes
are deferred on your contributions until they are withdrawn
-
An array of excellent
investment opportunities are available to meet your retirement
planning objectives
-
Interest and earnings
on your account accumulate on a tax-deferred basis
-
You may be eligible
for favorable tax treatment upon taking a distribution from the plan
How much
can I contribute to a 401(k) retirement savings plan?
When you join your company’s
retirement savings plan, you may be given a choice of how much you want
to contribute, generally a percentage of your gross salary (subject to
IRS guidelines and limitations). Some plans may also provide for a
matching contribution made on your behalf by your employer, to help your
savings grow even faster.
Can I
borrow against my retirement savings plan?
If your retirement savings
plan includes a loan provision, you may borrow against your account to
help you meet unexpected, immediate financial needs. The amount
available for a loan is subject to IRS restrictions. Loans are not
considered a taxable distribution as long as you repay the loan in
accordance with IRS requirements.
Can I
withdraw money from my retirement savings plan account for a financial
emergency?
Some retirement savings plans
do provide for in-service withdrawals without penalty, for financial
hardship. Financial hardship rules are subject to the provisions of the
retirement savings plan and the IRS.
Do I have
to pay a penalty for withdrawals from my retirement savings plan?
You may be subject to a 10%
penalty by the IRS for early withdrawal if you are under age 59 1/2 when
you make your withdrawal.
Will I
receive statements on my retirement savings plan account?
Yes, you will receive regular
statements that reflect all account activity and investment results. You
may also view your statement on-line with our service.
What are
my distribution options if I leave my current employer?
If you leave your current
employer to retire or to make a career change, you have the following
distribution options:
-
Roll your account
over to an IRA with an Investment Advisors or to any financial
institution of your choice
-
Keep your money in
your current employer’s retirement savings plan (if available)
-
Elect a Flexible
Distribution Option
-
Purchase
an annuity
-
Roll over to your new
employer’s qualified retirement savings plan
-
Take a lump sum
distribution (tax penalty may apply)
What money
is eligible to be rolled over into a IRA?
Any pre-tax contributions,
employer contributions and earnings may be eligible to be rolled over
into a Diversified IRA.
How do I
enroll in a Rollover IRA ?
Call for broker to receive a
free, comprehensive kit outlining the Rollover IRA. We will work with
you to understand the rollover requirements and to complete the
necessary forms.
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