Retirement

401k Plan Fee Disclosure

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More fraud happens in this country every year than you can possibly imagine. Technically, of course, it isn’t actually fraud because of the cheater’s loophole: disclosure. Disclosure is what makes every scam legitimate in the eyes of the law. As long as the company cheating you tells you they are cheating you, somewhere, anywhere, then they aren’t really cheating you, because you “know” about it. That these disclosures take place inside of 40-page documents filled with jargon and legalese makes no difference. After all, you signed a piece of paper saying that your read and understood the document that you never read, or understood. 401k Fees and Employer Understanding Make no mistake, the guy, or rather the team, of people that manage IBM’s 401k plan know exactly what they are doing. There is probably one or more finance people, legal people, and business people working on IBM’s 401k. As a result, the IBM 401k plan is certainly as well priced and delivered as the company requires. Subsequently, the 401k plan works well and is priced well for its employees as well. This is likely the case at most companies big enough to have both an actual HR Department and a Legal …

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Review IRA Beneficiaries

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When I was a financial planner, there were a lot of little things that came up over the years that I realized went unnoticed by the vast majority of people, no matter how well educated they were in finance and investing. Understanding, setting and updating the beneficiaries on accounts like IRAs was one of those things that slips through the cracks for many people. Of course, IRA plans aren’t the only accounts with beneficiaries on them. Be sure to check your life insurance accounts, annuities, 401k accounts, and other retirement plans to keep them up to date. Without this important part of estate planning, all your other efforts might be for nothing. Will Versus Beneficiaries One of the most important things to understand about accounts with beneficiaries, is that that accounts only become a part of your estate after your die, IF AND ONLY IF, there are no living beneficiaries assigned to the account. What that comes down to is that updating your will and changing who you are leaving what, does NOTHING to affect how your insurance or IRA account balances are distributed upon your death. Even if you specifically disinherit someone in your will, they will still get …

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2013 401k Limits

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The IRS published the new 401k contribution limits for 2013. By law, these limits are adjusted annually for inflation according to the governments cost of living statistics. For the last few years, there have been several small adjustments upward because inflation has been relatively tame during the slow recovery from the U.S. recession. The IRS also published increases for current 401k contribution limits. 2013 401k Contribution Limits The 401k contributions limits in 2013 increased by $500 over the 2012 401k contribution limits. The maximum 401k contribution in 2012 was $17,000. The 2013 maximum 401k contribution amount is $17,500. For 401k participants age 50 and older, there is a catch-up contribution available. The 2013 401k catch-up contribution is unchanged from the 2012 catch-up contribution. Using this provision, older 401k plan members can contribute an additional $5,500 per year into a 401k plan. With the catch-up contribution, the maximum 401k contribution limit for someone age 50 or higher in 2013 is $23,000. Remember that 401k contributions must be made via salary deferral according the individual plan rules established by each employer. Many plans have rules that allow only a certain maximum percentage of salary to be contributed. In years past, the IRS …

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Spousal IRA Contribution Limit 2011

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Contributions to IRA accounts for 2010 and 2011 are subject to an annual limit of $5,000 for all taxpayers under age 50. (The IRA contribution limits for 2011 are the same as the IRA contribution limits for 2010.) IRA owners over age 50 can contribute an additional $1,000 catch-up contribution to their IRA account for a total contribution of $6,000 per year. Contributions must come from taxable income. In other words, a parent cannot contribute to an IRA on behalf of a child with no earned income. For couples who file jointly, there is an exception called a spousal IRA.  A spousal IRA allows one spouse to contribute to the other spouse’s IRA up to the yearly IRA contribution limits for 2010 or 2011. If Bob makes $100,000 and Betty makes $2,000, typically, Bob could contribute $5,000 to an IRA and Betty could contribute just $2,000.  However, if the couple is married filing jointly, a full $5,000 contribution can be made to Betty’s IRA by the couple. If Betty is over age 50, a catch-up contribution is allowed to spousal IRA as well, so $6,000 can be contributed to the spousal IRA for 2010 and also contributed for 2011. If …

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401(k) Loans – The Great Gotcha

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Over on the Finance Gourmet information site, there is an article on the downside that most people forget when they take out a 401(k) loan. Most 401k plans require you to repay the full amount of any loan from your 401k within 90 days if you leave the company. If you don’t pay it back, it counts as an early withdrawal for people under 59 1/2 — OUCH!

How to Get a Bonus On Your Tax Rebate!

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Tax Graphic Ok, it’s official. Pretty much everyone in America is getting a [tag]tax rebate[/tag] this summer. The IRS says they’ll start mailing checks in May. So how would you like to get a nice tax-free bonus on your tax rebate? Here’s how.

Your tax-rebate is part of the [tag]economic stimulus[/tag] package recently passed by Congress and signed by the President. You will get up to $600 per person or up to $1200 per joint couple. You also will get up to $300 per child. That money will be a tax free payment from the government. So how do you collect your bonus?

If you qualify for a deductible traditional [tag]IRA[/tag] contribution in 2008 and you put your rebate into a traditional IRA then you will get to deduct the amount of the contribution. So, if you are in the 30% tax bracket, it’s like getting a 30% bonus in the form of a deduction on your 2008 taxes (which you will file in 2009). If you are self-employed you can accomplish the same thing using your SEP or SIMPLE IRAs.

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