In the wake of the financial crisis and the ensuing recession, many companies have reduce or suspend, their contributions to 401k plan. Many people do not know that many 401k plans, forced to make a matching contribution. Even though the company says it has stopped matching, it may be forced to make a game.
The question that most people have is: "Should I continue to make contributions if my company is not my 401k Matching? The answer is:definitely yes, if your 401k is considered to be top-heavy.
The government is forcing many small businesses 401ks to a top heavy contribution to make. This happens when the account balance for the owners of 60% of the total to more than for all other employees. For example, if there was a total of 401k plan account balance of $ 1,000,000, the plan was top-heavy, if the owner has a 401k account balance of $ 600,000 or more had. If find out if you are a candidate for the 401k, that This forced conformity, there are some things you should remember. Most officers are in the business as an owner treated, and the owner's spouse.
If a 401k plan is top-heavy, has the Company has a 401k match or equal to 3% of the salary of each participant. Most 401ks represent a percentage of what you put in. If you could be $ 1,000 to your 401k, your company 401k match are equal to 25% of what you contributed, or $ 250 But the top-heavy> 401k Match 3% of your salary.
If you make $ 30,000 to your company to give you a 3% match in the amount of $ 900. That is more than 2.5 times larger than the corresponding regular 401k. No, you are not so many as before. However, if your 401k is forced to give to you is equivalent to 3%, you are still free money.
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