lesson 13.4 401(k) july 2011copyright © 2011 … remtech, inc … all rights reserved1 introduction...

Lesson 13.4401(k)

July 2011 Copyright © 2011 … REMTECH, inc … All Rights Reserved 1

Introduction

The 401(k) is a defined contribution plan introduced in 1978

Many companies have switched from a pension plan to a 401(k)

It has become popular with both employees and employers

It is currently the designated retirement plan for 3 of every 4 companies

Moving from a pension plan to a 401(k) has shifted the responsibility for retirement from the company directly to the

employee

Lesson 13.4401(k)


Objectives

• Explain how a 401(k) works

You should be able to do the following after completing this lesson!

• Discuss the popularity of the 401(k)

• Review the advantages of having a 401(k)

• Identify why the employer matching funds are important

• Review the disadvantages of having a 401(k)• Describe how you become vested in a 401(k)

• Review the maximum amounts that can be contributed to a 401(k) each year

• Explain when money can be withdrawn from a 401(k)

• Define the key terms introduced in this lesson

Lesson 13.4401(k)


13.4.1 – What is a 401(k)?

• What a Defined Contribution Plan is

• Who provides a 401(k)

• Who will set up a 401(k) for you

• Who is eligible to participate in a 401(k)

• Who can contribute to your 401(k)

• Who decides how your contributions are invested

• What factors help your contributions grow

In this Section, you will learn

Lesson 13.4401(k)


13.4.2 – Advantages of a 401(k)

• What the advantages of a 401(k) are

• How much you can contribute to a 401(k)

• Why your contributions are tax-deferred

• What happens to your money in a 401(k) if you leave the company or are fired


• Who decides how your money will be invested

• Lost 401(k) Funds Example

You will run the following Interactive Example

Lesson 13.4401(k)


13.4.3 – 401(k) Disadvantages

• How many investments are included in a 401(k)

• Why 401(k) investments are not guaranteed to grow• How long it takes to become vested

• When you can contribute to a 401(k)

• When you can withdraw money from a 401(k)

• Why participation in a 401(k) is optional


• What the disadvantages of a 401(k) are

• Why many employees cash-out their 401(k) when they leave the company

Lesson 13.4401(k)


13.4.4 – 401(k) Contribution Limits

• How much you and your employer can contribute

• How companies limit the amount you can contribute to a 401(k)

• What the typical percentage a company will allow you to contribute to a 401(k) is

• What the typical employer matching percentage is


• How much you can contribute to a 401(k)

Lesson 13.4401(k)


13.4.5 – Withdrawing the Money

• What an early withdrawal penalty is

• How your withdrawals will be taxed

• What the IRS Hardship guidelines are

• When you must begin taking Required Minimum Distributions


• When you can begin withdrawing money from a 401(k)

• What the penalty is for an early withdrawal

Lesson 13.4401(k)


Discussion Questions

Why don’t companies help employees who have no knowledge of investing select the best investments for

their 401(k)?

How does a Roth 401(k) work and why is it gaining popularity?

lesson 13.4 401(k) july 2011copyright © 2011 … remtech, inc … all rights reserved1 introduction...

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