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IRA and 401k - Rules, Loans, Limits and More

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  • IRA and 401k - Rules, Loans, Limits and More

    No matter how long you've been working at a job, chances are you've had the opportunity to start putting money into a retirement fund. You can usually do so from the time you begin. You need to learn all about the IRA Rules/401k Rules that are involved before you sign up to invest a single penny. If you don't understand information that you get about these plans, ask your HR person before making any final decisions.

    Three kinds of individual retirement accounts or IRA's exist. Any of the 3 has it's own plus and minuses. Traditional IRA's were the first IRA's created and are the most common. With this kind of account, your savings may be taxed but not necessarily. It all depends on your situation. It's always best to check with your plan administrators for full details. You can feel safe knowing that the money you contribute won't be facing income taxes, though.

    In 2009, you'll be able to put $5,000 from your earnings into your traditional IRA. You've got to be under 70 to add funds from your income and you must have taxable income to contribute to the account. IRA limits and 401k limits change each year, so take advantage of it. Your income is deemed as salaries, bonuses, wages or other forms of income like tips. You can't contribute with stock dividends.

    Those are the golden rules to know about IRA's. Of course when money's concerned, there are always a long list of rules and restrictions. To find out all about your restrictions, speak to the plan administrator. Your 401k account is subject to some rules, as well. For this years 401k limits, you can't add more than $49,000 to the 401k account.

    The cash you add to your 401k account through your paychecks is immediately vested to you. You won't lose this money any time for any reason. It's good to know that no matter what you do, this can't be taken from you. Even if you quit without giving notice, you will still have your full account to take with you. Money that your corporation adds to the 401k, though, is different. They dictate their own vestment calendar and they'll tell you all about their plan before you are signed up and contributing.

    If you're in need of money there are 401k loans available. 401k loans are for the most part a bad idea and should be avoided. There are a number of implications, so proceed with caution when considering borrowing against your 401k retirement plan.

    Watch for paperwork when you leave your current employer. This is when you really need to read the small print on the contract. Your rules and regulations can jump up and bite you if you're not paying attention to them, at this time. When you remove the funds from your 401k, you are going to have to be careful. First of all, you have to take the funds out which is highly unfair to you, especially if you were wrongly let go from your position.

    If you transfer companies, you will be hearing from the 401k plan coordinator. You need to pay attention to everything you're told in writing or verbally. This is the part where you can make or break your retirement fund. If you get the money from your 401k account given to you directly and the name on the check is your own, you're going to automatically lose 20% of the fund, no question. If you decide to roll the money over to an IRA, you'll spare yourself this loss.

    Get the check written out to the IRA plan administrators and you won't lose this precious chunk of your account. Get the money into your new IRA within 60 days of getting the check in the mail and you'll be safe from losing any more money, as well. Take care of your retirement fund and it will take care of you. Make sure you know all of the rules before you make any changes.

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