Finding its roots back in the 1980s, the 401k has been the most widely-known retirement savings account for a lot of employees in the United States. The name has been taken from the Internal Revenue Code subsection 401(k). This eventually became popular as a good option to the common retirement pension plans which were prevalent at the time. The big difference with this one, however, is that this is paid by the employees and not by the employers themselves. Most workers find this more favorable on their end, that’s why this alternative has been positively accepted by the public.
Of course, individual 401k contribution limits are also observed and checking with the Internal Revenue Service (IRS) should be done if people want to know the latest figures. The required amount of the contribution can vary from one year to another, that’s why visiting the official website or inquiring at the IRS offices is always important. For example, 2010 reports confirm that the amount limit for solo contributors is from $49,000 to $54,500 for those who are at least 50 years old or older. The fee consists of two parts namely salary deferral and profit sharing contribution. Actually, the 401k also offers great flexibility and the specified amount may be modified to fit the needs and capacity of different individuals.
Needless to say, signing up for these retirement plans is highly recommended so individuals could prepare for their future. The creation of the law called the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) has also made it possible for self employed individuals to avail of these savings plan. Individual 401k contribution limits can be available for husband and wife businesses, but the amount may be doubled. On the other hand, employed couples could sign up for separate contributions on their payroll as long as they have already reached the right age.
Now there are a lot of advantages that come with this retirement plan such as bigger contribution limits, tax deferred growth, flexibility in terms of contributions, better access to tax free loans, and retirement plan consolidation among others. That’s why it is definitely not surprising to discover that as of 2011, the reports indicate that at least 60% of American households have already signed up for their own individual 401k contribution limits.
To have better comprehension about specific terms and conditions, getting in touch with expert financial advisers is definitely a big help.