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When Can I Take Money Out of My 403(b)?

403(b)s have essentially the same distribution rules as 401(k)s. The advice given for 401(k) accounts still applies here: taking money out of a retirement account before retirement is strongly discouraged. You may withdraw your money penalty-free at age 59½, and you must begin taking annual withdrawals that satisfy RMD requirements on April 1st of the year you turn 70½. If you withdraw money before age 59½, you will be subject to a 10% penalty in addition to regular income taxes. Continue reading...

If I Want to Establish a Money Purchase/Profit Sharing Plan, Do I Have to Establish One for All Employees of My Business?

Eligible employees have to be included in money-purchase and profit-sharing arrangements. If an employer established a Money Purchase/Profit Sharing Plan, all eligible employees must have employer contributions deposited into an account for them. Normally an employee will agree to open an account to hold his or her employer contributions, but in some cases an employee will not want it. An employer must follow specific IRS instructions to open an account for such employees, to keep the plan compliant with ERISA and other regulations. Continue reading...

How Can I Establish a Self-Employed 401(k)?

Establishing an Individual 401(k) might only take you a matter of minutes. You can establish a Self-Employed 401(k) by going to an Individual 401(k) provider, or asking your Financial Advisor for help and/or recommendations. However, make sure that you are satisfied with the conditions your provider offers. There are dozens of choices available to you, all with different investment options and fee structures. There are plenty of good ones without annual plan fees, lost cost investment options, and a wide variety of investment choices. Continue reading...

How Does a 401(k) Work?

You may know that a 401(k) allows you to make payroll-deducted contributions to a retirement account before taxes are taken out, but how does it work? Employees can either become participants in a 401(k) by voluntary enrollment or by automatic enrollment with the ability to opt-out. Contributions go in before taxes are taken out, and this can reduce an individual’s taxable income or even income bracket for the year. Continue reading...

How Do I Invest Money in My 403(b)?

Investing in a 403(b) is done by making contributions via payroll deductions and selecting investment options from among the available choices with your custodian. Payroll deductions on a pretax basis are routed into your 403(b) account with your consent. This can be done by telling the payroll department what percentage of your compensation you would like to send there, or by telling the plan custodian company, who tells your payroll department. Continue reading...

What are My SIMPLE IRA Investment Options?

SIMPLE IRAs will have various kinds of investment options, depending on the trustee company that holds the plan assets. SIMPLE IRA investments are determined by the financial institution at which your SIMPLE IRA is established. When opening a SIMPLE IRA, be sure to check what investment options the financial institution offers as well as the fee structure. Standard ERISA rules apply, meaning that all employees must be offered the same thing. SIMPLE IRAs can only be held at trustee companies whose business model is on the IRS’s list of approved SIMPLE Trustees. Continue reading...

Who Administers a 401(k)?

A 401(k) plan Administrator will usually be an officer of the Employer sponsoring the plan. A 401(k) plan document will specify who is the Administrator of the plan, but it is generally an executive or officer of the company sponsoring the plan. 401(k)s can be sold in packages that are essentially the same from employer to employer. When the design is well-established, and there are systems in place to enroll employees and maintain the plan, such as an employee website, a company’s CFO or human resources department chair may wear the Administrator hat. Some plans require a special administrator, and this may be a requirement of the broker-dealer acting as Custodian, especially if the plan has been designed from an open architecture, and there are many moving parts. Continue reading...

What is a Matching Contribution?

Employers can contribute to an employee’s 401(k) on a matching basis. Some employers will make additional contributions to your 401(k) based on the amount of your own contributions. Matching can be done on a dollar-for-dollar basis, meaning that for every dollar you contribute to your account, they will add a dollar as well. It can also be done using a factor, such as ½, meaning they will contribute a dollar every time you contribute two. Continue reading...

What Is the Employee Retirement Income Security Act?

The Employee Retirement Income Security Act (ERISA) stands as a crucial federal law enacted in 1974 to safeguard the retirement assets of American workers. It achieves this by implementing a comprehensive set of rules and regulations that employer-sponsored retirement plans must adhere to, ensuring that plan fiduciaries act in the best interests of plan participants. ERISA has undergone numerous amendments and has evolved over the years to meet the changing needs of the workforce. Continue reading...

How Does the Money in My 401(k) Get Invested?

Employers sponsoring 401(k) plans are required to give employees the information and ability to manage their own accounts, using the investment options provided to them by the plan administrator and custodian. Sometimes employers and 401(k) custodians will provide employees with simplified systems by which to determine what kinds of investments appeal to them, and how they would like to allocate their portfolio in pursuit of their retirement goals. Continue reading...

How is a 403(b) Different From a 401(k)?

403(b)s are essentially the same as 401(k)s but there are a few notable differences. A 403(b) is extremely similar to a 401(k); the main difference is the type of employer than can offer each. 403(b)s are offered by public educational institutions, non-profit hospitals, non-profit organizations, religious groups and some government organizations. Due to the negotiating powers of many of those institutions, and their non-profit status, the administrative fees are smaller and they are not subject to some of the administrative oversight imposed on 401(k)s. Most 403(b)s are not subject to ERISA, which means they don’t have to satisfy as many auditing and reporting requirements. Continue reading...

What are My Money Purchase/Profit Sharing Plan Investment Options?

Generally the same kind of investment options available in a 401(k) are present in these plans. Money Purchase and Profit Sharing Plans have several investment options, including stocks, bonds, mutual funds, fixed accounts, annuities, certificates of deposit, and a few others. Keep in mind that Money Purchase and Profit Sharing Plan investments are determined by the financial institution at which your plan is established. If you are opening a Money Purchase/Profit Sharing Plan, be sure to find out what investment options the financial institution offers and what fees may be charged to accounts per year, per trade, etc. Continue reading...

What are My Keogh Plan Investment Options?

Keoghs can hold a wide range of investments, and it will mostly depend on your plan trustee. Keogh plans have the ability to include many investment options, from stocks to bonds, certificates of deposit to cash value life insurance, and so on. Keep in mind that Keogh Plan investments are usually determined by the financial institution at which your Keogh Plan is established. When opening a Keogh Plan, be sure to check what investment options the financial institution offers, and how much in fees and commissions they would charge for these investments. Standard ERISA rules apply, so all employees must be offered the same options. Continue reading...

What are the Contribution Limits for My Money Purchase/Profit Sharing Plan?

Contributions are generally limited to 25% of employee compensation, but a small addition amount may be contributed for higher-income employees. Money Purchase plans and Profit Sharing plans are funded by employer contributions, and in general these contributions cannot exceed 25% of gross compensation. For a self-employed person or a partner in a pass-through entity, the real percentage of contributions cannot exceed 20% of net profits because self-employment taxes will reduce the amount of profits considered compensation, as will the actual contribution. Continue reading...

What are the 457 Plan Contribution Limits?

Contribution limits depend on if you are making contributions as a government employee, a non-profit employee, or a highly compensated employee. Government employees can defer up to $18,000, plus a $6,000 catch-up contribution for those over 50, in 2016. These plans use the same elective deferral limits as 401(k)s. A non-governmental, non-profit employee can only contribute the $18,000, and is not allowed to make the $6,000 catch-up. Both of these types of employees are allowed to use the alternate catch-up provision of 457s, however. Continue reading...

How Does HIPAA Impact Financial Perspectives?

Ever wondered how your medical data remains private and secure? Dive into the world of HIPAA, the groundbreaking act that revolutionized healthcare privacy and data protection. From its inception in 1996 to its modern-day implications, discover how HIPAA shapes the healthcare landscape Continue reading...

How Can I Establish a SEP IRA?

SEP IRAs do not have to be established until taxes are filed for the year, and it can be done quickly. SEP IRAs require very little paperwork or trouble to establish. One form will notify the IRS that SEP contributions are being made for the year, and the amount. The only other documentation needed is a plan document, which establishes and outlines the eligibility rules for a particular plan, but this document only has to be kept on file at the business, and does not have to be submitted to the IRS or any regulatory authority. Continue reading...

Can I Take Loans Against My 401(k)?

401(k) plans typically allow loans to be taken, so that investors don’t have to pay taxes or an early-withdrawal penalty on the money. Many 401(k) plans allow loans to be taken out on the account balance, up to certain limits, and on a strict repayment schedule. Most plans require loans to be repaid in under two years, but they can give participants up to 5 years to repay a loan. Taking money out as a loan allows participants to avoid early withdrawal penalties and taxes. If the loan is not repaid on-time, it can be treated as a distribution, however, which might cause the investor to incur taxes. Investors usually don’t fully realize the damage that loans (and early withdrawals) can do to the long-term account balance. Continue reading...

What is the Difference Between Cash-Balance Plans and Other Retirement Plans?

Cash Balance plans are Defined Benefit plans, but are not much like Pensions as you may know them, or other types of retirement plans, for that matter. On one side of the retirement isle you have defined contribution plans, such as 401(k)s and SEPs and so on, where the contributions are certain, or at least ascertainable, while the ending balance or benefit of each employee’s account is unknown, or at least does not have to be (and in most cases isn’t). Continue reading...