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Rick PendykoskI brings a unique skill set to Self Directed Retirement Plans LLC. Thirty years ago, in 1982 he purchased a franchise opportunity. The Franchisor was a relatively new private company and their pro forma indicated a successful franchise would peak at $900,000 per year. Rick... More
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  • Everything About 401(K) Calculator

    (click to enlarge)

    401(k) contribution is a provision offered by employers whereby an employee needs to make a contribution towards the retirement fund in order to receive the benefits. However, how much you contribute towards it must also be carefully planned to receive its complete benefits. If you make the complete contribution of $17,500, the maximum limit of 2013, or $23,000, which is the limit for 50 years or older aged employees, then you have paid the bulk of the contribution and effectively reduced the employer's share. The employer's contribution also differs between different organizations, some may offer 100% contribution and others less that 10%.

    The 401(k) is a secure retirement planning tool, which provides you the additional advantage of tax deferrement. As the contribution is deducted from your untaxed salary, reducing your taxable income.

    The 401(k) Calculator

    The internet is flooded with calculators for 401 (k) contribution that will appropriately tell you how much you are likely to receive on retirement based on the amount of the contribution made. This will help you plan your investments accordingly. The calculator will have space for entering your:

    • Current 401(k) balance
    • Current annual income
    • Expected annual salary increase
    • The percentage of salary withheld for 401 (k) invested:
      • Weekly
      • Every two weeks
      • Twice in a month
      • Every four weeks
      • Monthly
      • Quarterly
      • Annually
    • Employer match:
      • Weekly
      • Every two weeks
      • Twice in a month
      • Every four weeks
      • Monthly
      • Quarterly
      • Annually
    • Years of Fund 401(k)
    • Average annual interest rate earned, compounded:
      • Daily
      • Monthly
      • Quarterly
      • Annually

    Once you enter these details, the contribution is calculated directly and displayed. Some calculators also factor in your age, which is also an important component since there are different caps on the maximum contribution.

    Borrowing from 401(k)

    An important provision of this plan is that you are allowed to borrow from the fund in case of an urgent requirement. In such as case, however, the value of the amount received on the retirement will reduce. The repayment happens through automatic payroll deduction and the loan has to be repaid within five years. In case you change your job in this duration, then you will have to repay the full balance within a short time or pay penalties and taxes. There are calculators available to assess the effect of borrowing from 401 (k) too.

    Points to Remember

    Some important points to note are that the contribution calculated is made at the end of the period mentioned. Since IRS caps the maximum annual contribution, and your plan might have its individual lower limits based on your employer policy, which may even allow after tax contributions. Further, if you are classified as a highly compensated employee, you will have some additional caps that your company will have details about. Finally, the calculations are approximations of the value you enter and can only be used as a guide. You might experience fluctuations in returns on the basis of factors such as a change of job at a higher pay and so on.

    Jul 07 7:11 PM | Link | Comment!
  • Plan Gracefully, Retire Peacefully

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    The fear of inflammation and recession is a constant. Facing the daily challenges of price hike and stumbling employment security, the average citizen has understandably pushed aside the issue of retirement planning. Most employees spend their income in mortgages and debt while the much required retirement plan remains unattended. However, even for people who think they are past the time of saving, there is still hope for a healthy retirement savings. You can save responsibly without compromising expenditure and gain the right to a financially protected and peaceful retirement.

    Tips for a healthy retirement plan:


    • Lose the debt

      The first issue that presents a common hurdle in planning a retirement is debt. In today's rapidly progressing world, most employed people go for a loan or EMI plan for purchase of housing or car or some other personal need. Although the idea is lucrative and seems resourceful to begin with, many times these debts or mortgages accumulate making it hard to save the income. If these debts and mortgages stay on for a long duration, it can spoil any scope for planning a retirement. Hence, it is advisable to pay off debts or rather not adopt many debts when you intend to plan for a healthy retirement.

    • 401K -a tax-free help!

      Popularized since the 80's as a simple solution for a tax-deferred savings program, this can be crucial in planning for your retirement. According to this plan, an employee can contribute up to $16,500 of their annual income to the plan such that it can be withdrawn later. The contributions can be made pre-tax or post-tax payment from your income. Even in case of pre-tax contributions, the amount will be taxed only upon withdrawal, which increases the annual compound interest offered on the money saved in a 401K. Hence when withdrawn after a long time, say when you retire, the amount, even after tax-deduction (in case of pre-tax only) is a healthy feat for a happy and lavish retirement. Also, the employer can offer to match your contributions to the 401K, making your savings even higher.

    • Roth IRA -a reservoir of investment options

      Another popular option for planning a retirement savings account, this plan works in your favor by offering a tax reduction on the withdrawn amount. Like the 401K, this helps increasing your savings amount by multitudes through the compound interest offered. Also, you can invest in this plan in the form of common stocks or bonds or even mutual funds and real estate. However the limits on the contributions made to this plan are $ 5500 until the age of 49 and up to $6500 after 50 years of age. Of course, these contributions can be topped up by your spouse making it a great plan for a peaceful retirement.

    These plans and tips can be instrumental in having a safe and financially secure retirement, at the same time keeping up with your regular expenses. However, it would be always ideal to begin investing in your retirement as early as possible. These plans work much better when invested in for a longer duration. But that doesn't stop you even for a moment from starting now. With the access and advantages of these plans, it will never be too late.

    After all, everyone deserves a happy second inning!

    Jan 22 10:20 AM | Link | Comment!
  • Implications Of Self-Directed Rollover – 401(K) To IRA & IRA To 401(K)

    What is a Self-Directed Rollover?

    A self directed rollover involves transfer of money from one retirement account to another. A rollover may involve moving your funds from your 401(k) or 403 (b) accounts to a self-directed IRA account and even vice versa. There are two ways in which you can execute a roll over -

    1. Classic Rollover and

    2. Direct Rollover

    The classic rollover happens in two steps:

    Step 1 - The entire money from one of the account is withdrawn and transferred to the investor bank account by issuing a check.

    Step 2 - The investor transfers the money received, to the new retirement account.

    In case of classic rollover transfer to the new account should happen within 60 days of receiving money, or else the usual taxes and penalty on withdrawal will apply which could be as high as 45% of the money received. In case of classic rollover, a withholding tax of 20% is applied on the money received.

    Direct Rollover - The modern way of rollover is a direct transfer, which is more efficient. In direct transfer the money is transferred directly to the new account and no withholding tax would apply. Thus the money does not pass through the investor and is trustee to trustee transfer.

    Rollover from a 401(k) to IRA

    Rollover 401k to IRAYou may generally need to roll-over from a 401(k) when you are quitting you current job and you want to move the money you invested in your previous employers' 401(k) plan to a retirement account of your new employer. The new retirement account as well could be a 401(k) or even a self-directed IRA.

    Benefits of rolling over your money from a 401(k) to a self-directed IRA

    By rolling over you avoid cashing out your 401(k) plan, which is very expensive. Cashing out of your retirement plan prematurely can cost you upto 45% of your investment, due to taxes and early withdrawal penalties. If you rollover your money from 401(k) into a self-directed IRA, you get greater control and wider choice of investment options.

    Roll Over from IRA to 401(k)

    In some cases, people want to transfer the money from their IRA to 401(k) plans. Some of the reasons why people may take such a move are -

    • They have too many retirement accounts and want to consolidate to avoid stress of managing so many accounts.
    • They do not have the time or resource to manage their self directed IRA.

    If you are thinking of self directed IRA rollover, you should have participated in your current IRA account for atleast 2 years, else the cost of rollover is hefty. Besides, you also need to see that your 401(k) or 403(b) accounts allows you to take such a rollover as according to the laws you can only rollover tax deductible contributions and earnings. So, in the case, you have also made certain non-deductible contributions to your IRA account, you will not be allowed to rollover the entire amount to your 401(k) account. Besides, you must also keep in mind that inherited IRAs are not allowed a rollover to 401(k) accounts.

    Experts' suggest people to think hard about the investment options and fees in the 401(k) plan before making such a move. Also keep in mind that you can withdraw funds from IRA whenever you need or desire. Though early withdrawal attracts taxes and penalties, but you can still do so if needed. On the other hand, you need to meet certain very hard guidelines for withdrawing money from your 401(k) account.

    Sep 06 11:28 AM | Link | Comment!
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