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Basic 401k Info

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401k Glossary of Terms and Useful Tips

There is a great deal of confusion when it comes to retirement plans and exactly what each one is. What we are focusing on here is the act of rolling over a 410K plan.

If you have been participating in a group retirement plan at work, where you and your employer are contributing into it, on your behalf, then you have a plan that is holding money that you own. The important thing to note is that this is considered a group plan. The reason that is important is that if you were to leave that job, you would no longer be part of the “group”. As such you will need to move those funds out of that plan and into one of your own choosing.

This is called rolling over your funds; a 401K Rollover.

You want to be secure in the terminology used when discussing your options with a financial professional.

A few of the more important terms are;

Group Plan
A group plan is one that must be offered to all employees of a company. Not all employees must participate, but all must be offered the opportunity. If you no longer work for that company, then you are then not part of the group, and no, longer eligible to participate.
An IRA is an Individual Retirement Account. A retirement fund of this nature does not have to be a group.
A limit is the maximum amount of money that can be placed into a retirement plan in one year. 7% is often the maximum amount of total earnings per year an employee could contribute to a plan.
This is the stated amount a company will contribute to an employees plan in any given year, and is defined as a percent of the total amount an employee contributed to a plan on their own. For example a company may state, as an employee benefit, that they will match 3% of an employees contribution up to a maximum of a percent of the employees total annual salary.

Financial Definitions and terms.

Financial terms and definitions can be complex and difficult to understand. On the preceding page we defined and gave illustrations of a few of the most important ones. If you have time it is always beneficial to gain as much comfort as possible with the language you will be confronted with when talking to insurance agents or financial advisers.

Here is a great link to the Forbes financial web site. They have a searchable glossary of terms and good information.

How can I find out more?

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