In these uncertain economic times, a lot of people become aware early on that they need to set funds aside for their retirement. Their retirement plan or 401k plan becomes their nest egg, which should have ample savings for them to live on when their working days are over. Fortunately, companies that offer financial planning can help grow this nest egg of savings.
Many people have a savings account plan called the 401k. This retirement plan enables individuals to continually deposit their savings into this account, straight from their income. The best feature of the 401k plan is that it is secure. No matter how much you put into the account every month, it remains stable because you cannot withdraw from this account until you retire. The best part about the 401k plan is that it is tax deferred, meaning the employee does not have to pay taxes for the amount deposited.
The fact that the 401k plan is non-taxable can affect the overall taxes that an employee has to pay. Since a portion of the employees income goes straight into this account, his actual taxable income decreases. Meanwhile, the funds in the 401k account continue to grow without being affected by taxation. This ensures higher investment returns than most other investment plans.
Some employees are concerned that they might leave their 401k plan unmonitored when they change jobs. The good news is that the 401k plan can follow them throughout their career through a 401k rollover. A 401k rollover is one of the many options an employee has when they change jobs. This allows an employee to transfer or rollover their previous 401k savings into another 401k)plan set up by their new employer.
A 401k rollover maintains money in a single account, which is considered more convenient than an IRA, or the Individual Retirement Account. The IRA is similar to the 401k, but it can be tough for some people to monitor. Asset Management Strategies, Inc. provides clients peace of mind, knowing that an investment manager is overseeing their retirement investments.
Handling the transfer is important. Direct rollovers should be implemented to prevent penalties from being incurred by the transfer. These penalties occur because some 401k transfers are considered early withdrawals, which call for 10% payments.
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