401(k) Retirement Plans

401(k) Retirement Plans401(K) plans are tax-deferred retirement savings plans for employees. The employer sets them up, and each company has a slightly different 401(k). They are part of a family of retirement plans known as “defined contribution” plans-the amount contributed is defined by the employer or the employee.

When you join a 401(K) plan, you tell your employer how much money you want to contribute to your account. There are 2 types of plans. The tax deductible version or the Roth plan. Depending on which plan is offered to you, the amount of your contribution is deducted from your salary before taxes are applied, so you pay less income tax. More importantly, the money is deducted even before you have received it, making it the easiest savings plan to contribute to. Your employer may match a portion of your contribution.

Your employer is called the Plan Sponsor. The Sponsor hires a Plan Administrator to manage the payroll and contribution records, and the money is invested by the plan administrator (on your behalf). The Plan sponsor will offer a variety of investment choices in mutual funds, bonds, money market accounts, etc. You decide the mix of investments. Be sure to read this information carefully and ask for help if you have questions. They usually have a list of investment vehicles you can choose from as well as some guidelines for the level of risk you are willing to take. Retirement plans are highly regulated by the IRS. Since the plan is an incentive for retirement savings, there is one condition: if you withdraw the money before you are 59½ years old, you will have to pay tax as well as a 10% penalty fine to the IRS.

Strate Insurance Group offers free, comparative quotes on 401(k) retirement plans from multiple insurance carriers so you can get the best possible rate.

Want to see how much we can save you? Just request a quote to find out.