401a Retirement Plans

Also called 401a money purchase plans, 401a retirement plans are one of the most versatile ways to save for retirement. For those who are looking for a retirement plan, it’s easy to get confused by the range of choices and options. This choice is made even more painful by the fact that many types of retirement plans force investors to make crucial decisions such as how much and when to contribute before even signing up. However, there is a solid option for those who prefer to leave their options as open as possible. With one of these 401a plans, the choices are left entirely with the employees saving for their future and the employers offering the plan.

The first choice is whether the 401a retirement plan's savings should be withdrawn from the employee’s wages before or after taxes. There are distinct advantages to both situations. On one hand, subtracting retirement savings from an employee’s wages pre-taxes allows them to have a lower taxable income along with all the benefits ensuing. On the other hand, pre-tax retirement savings are subject to a unique set of regulations and limits. Not only can people participating in 401a choose from one these options, they can even opt to do both. In many cases, an employer will take a portion of pre-tax earnings for the retirement plan and allow the employee to add an amount of his choice taken from his net earnings.

What are the benefits of 401a plans? Like many other retirement plans, they allow employees to lower their taxable income and save at the same time. The earnings grow tax deferred, which means a higher long term growth rate. Another key benefit is that the money from this retirement plan can be rolled over into another 401 plan, a 457 plan, or an IRA. This gives people the freedom to change employers and careers without losing their hard earned retirement savings.

Although some employers may have mandatory contributions, 401a plans themselves have no minimum contribution. There are no maximum contributions either; investors may contribute up to the maximum amount allowed by the IRS. In addition, the IRS allows investors to contribute to their 401a plan as well as other retirement accounts, such as a 457.

Contributing to 401a is streamlined and simple, but so is the process of withdrawing funds when the time comes. Investors can choose whether to withdraw funds when they retire or when they leave their current employer. The only penalties are those imposed by the IRS, and taxes are only taken from the money withdrawn. Many plans also allow investors to borrow money from 401a retirement plans.

If you are looking for a retirement plan that you can tailor to your unique needs and the freedom to change as your life changes, 401a retirement plans may be the perfect choice for you. A solid method of retirement investment with the versatility to roll with the punches, this plan is a sure bet for investors who don’t want to be stifled or trapped by their retirement plan.