This Life Advice booklet 401(k) Plans was produced by MetLife Corporate Communications and reviewed by The Internal Revenue Service.

Many Americans today are living longer, healthier lives, which could mean your finances may need to accommodate extra years of retirement. It’s up to you to make yours a comfortable retirement. In most instances, Social Security alone will not provide you with as much money as you were earning before you retired. That’s where a 401(k) comes in.

Fortunately, you may have access to a powerful retirement tool that can provide a portion of your retirement income—a 401(k) plan provided through your employer. What you get out of a 401(k) generally depends primarily on how much you put in and how wisely you invest your monies. This booklet can help you reap the full benefits of your plan.

What Is a 401(k) Plan?

A 401(k) plan (named after a section of the federal tax code) is an employer established plan somewhat similar to an Individual Retirement Account (IRA). Both plans are designed primarily as retirement savings plans. A 401(k) plan is generally funded with your before-tax salary contributions and, oftentimes, matching contributions from your employer. Your contributions, employer contributions (if any) and any growth in your 401(k) account are tax-deferred until you withdraw the money. Once money is in your 401(k), you generally cannot make withdrawals before age 591/2, except for special circumstances. Many employers, however, include loan provisions in their plans.

Benefits from Investing in a 401(k) plan:

• Your contributions, any employer contributions, and any earnings on your 401(k) account grow tax-deferred; which means they are not taxed until they are withdrawn. Consequently, you have more dollars working for you, and your account balance may grow more quickly.

• Your current gross income is reduced by the amount you contribute. Contributions are usually made pre-tax, which means you are not subject to Federal (or most state) income tax on your contributions to the plan until the money is withdrawn, typically at retirement. You may be in a lower tax bracket at that time; if so, you would pay less tax. This also means you have more money in your account working for you. Contributions are subject to Social Security and Medicare taxes.

• Automatic payroll deductions make saving for retirement easy. You’re less likely to miss money you never see. • You can control your own account. Unlike traditional pension plans, 401(k) plans often allow participants to choose how to invest their contributions. Participants can be as aggressive or as conservative as they wish in selecting investment options offered under the plan.

• The plan is “portable.”When you leave your current employer, you can have the option of rolling your 401(k) money over into an IRA (Individual Retirement Account) or a new employer’s plan or withdrawing the money. Keep in mind, however, that withdrawing money before age 591/2 can mean you will pay taxes on the withdrawal and, generally, an early withdrawal penalty of 10 percent if the money is not rolled over or directly transferred to an IRA or another qualified retirement plan on a tax-deferred basis.

• You can invest in professionally managed funds at no minimums. Retail financial service providers may impose minimum investment requirements.With a 401(k) you can get started investing a little at a time.

• You may be able to borrow from your account. Many plans have loan features that let you withdraw money (without taxes or penalties) as a “loan to yourself.” You may be able to pay the loan back automatically through payroll deduction, and the loan interest goes into your own account, too.

• Your employer may contribute “matching” funds on a portion of your savings. If so, you reap an instant benefit from contributing to your plan. For example, if your employer contributes 50 percent of the amount you contribute, you would receive an additional $50 added to your account for every $100 you contribute, up to the plan limits.

Download 401(k) Plans

PDF format, 460KB, 9Pages.

Table of Contents
What Is a 401(k) Plan? . . . . . . . . . . . . . . . . . . . . . . . .1
What Are My Investment Options? . . . . . . . . . . . . . . .2
Questions to Ask When Choosing
Your 401(k) Plan Investments . . . . . . . . . . . . . . . . . . .3
For More Information . . . . . . . . . . . . . . . . . . . . . . . . . .6

Visit 401(k) Plans MetLife Download Page

You can read 401(k) Plans online, or download publication in PDF format.

For More Information

Brochures from the Federal Government
The quarterly Consumer Information Center Catalog lists more than 200 helpful federal publications. Obtain a free copy by calling 888-8-PUEBLO or on the Internet at www.pueblo.gsa.gov.

Helpful Websites
www.irs.gov/faqs/faq-kw7.html 
This IRS link answers frequently asked tax questions about 401(k) Pension Plans. It includes links to other IRS sites related to your retirement.

www.irs.gov/taxtopics/tc424.html 
Tax Topic 424 from the IRS on 401k Plans

www.dol.gov/ebsa/publications/wyskapr.html 
This Department of Labor link provides a discussion entitled “What You Should Know about Your Retirement Plan.”

www.aarp.org 
The American Association of Retired Persons provides information on annuities and other topics related to financial planning for retirement.

Visit MetLife, Inc. Website

The Employee Retirement Income Security Act of 1974, as amended (ERISA) requires employee benefit plan fiduciaries to act solely in the interests of, and for the exclusive benefit of, plan participants and beneficiaries. As part of that obligation, plan fiduciaries should consider cost, among other things, when choosing investment options for the plan and selecting plan service providers. They should carefully consider and compare all services and fees offered by different service providers.

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this booklet is not intended to (and cannot) be used by anyone to avoid IRS penalties. You should seek advice based on your particular circumstances from an independent tax advisor.

Neither MetLife nor its representatives or agents are permitted to give legal, accounting, ERISA or tax advice. Any discussion of taxes, ERISA, or accounting rules included in or related to this newsletter is for general informational purposes only. Such discussion does not purport to be complete or to cover every situation.

ERISA and current tax laws are subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the particular set of facts and circumstances. You should consult with and rely on your own independent legal, accounting, ERISA and tax advisors.

Comments (0)

Name

Email

Comment

smaller | bigger

Add Comment