The 401(k) plan is one of the most popular and common retirement plans today, with over half a million different company plans already in place. In today’s post, AOG Wealth Management, experts in asset management, discusses the basics of a 401(k) plan, its benefits, and why it is integral to your retirement preparations.
The 401(k) plan is a qualified employer-established plan in which eligible employees may make a salary deferral or reduction contributions on a pretax or post-tax basis. Your employer has the option to make matching or nonelective contributions on your behalf, and even add a profit-sharing feature. All of the earnings you accrue in the 401(k) plan accrue on a tax-deferred basis.
The main benefit of the 401(k) is tax savings, which are crucial in any larger asset management plan. Since you have the option to contribute a certain percentage to the plan on a pretax basis, the amount is essentially exempt from current federal income tax, which lowers your taxable income in the process.
Additionally, all of your earnings in this plan accrue on a tax deferred basis. As a result, any dividends and capital gains you earn inside the 401(k) plan will not be subject to taxes unless you start withdrawing from it.
Additionally, the 401(k) plan offers excellent creditor protection. It’s considered an ERISA-qualified retirement account, which means it’s set up under the Employee Retirement Income Security Act. Apart from judgement creditors, your plan offers you some protection from federal tax liens. Since the plan legally belongs to the employer, the IRS won’t be able to place a lien on your account as easily.
AOG Wealth Management offers professional investment management services. We’ll help you with your financial decisions when it comes to your retirement plans. Give us a call at (866) 993-0203 for more information on our services. We offer professional asset management services throughout McLean, VA and Washington, DC.
This material is educational in nature and should not be deemed as a solicitation of any specific product or service. All investments involve risk and a potential loss of principal. Kalos Capital nor Kalos Management offer tax and legal advice. Please consult with a tax advisor or attorney for advice regarding the impact on your portfolio.
The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation.