CAPTRUST 401k - Frequently Asked Retirement Planning Questions

Q: What are some of the advantages a 401(k) savings plan offers over a traditional savings account or an IRA?

A: A 401(k) plan allows you to save with pretax dollars. Unlike a regular savings account, the amount you contribute to a 401(k) plan, and its earnings, are not considered taxable income in that year. The contributions are made through convenient payroll deduction and provide immediate tax reduction because your taxable income is reduced. The maximum annual amount you may be able to contribute under a 401(k) plan can be greater than that for an IRA.

Q: When are these savings taxed?

A: Savings are taxed when they are withdrawn from the plan. However, it is likely that you will be in a lower tax bracket and may even be eligible for favorable tax treatment upon retirement. You may also roll over 401(k) savings into an IRA and continue to defer taxes. However, you must begin taking distributions from your IRA by April 1 following the year in which you turn age 70 1/2.

Q: When do I become eligible to receive the funds? What if I need my funds before then?

A: Normally, you are eligible when you retire, become disabled, die, or separate from service. If you have not reached age 59 1/2 and elect to receive the distribution of your vested interest, a 10 percent penalty may be applied against the amount of this distribution, unless
- the distribution is made due to your death or because you have become disabled
- you terminate employment after you reach age 55
- the distribution is used to pay unreimbursed medical expenses that are deductible (above 7.5 percent of your adjusted gross income)
- the distribution is in the form of a life annuity
- the distribution is a "direct rollover" that is paid directly to another qualified plan or an IRA.

Q: Can I still save through an IRA?

A: If you participate in your employer's retirement plan or 401(k) plan, you and your spouse may continue to save using IRAs. However, you may not be able to make a deductible IRA contribution.

Q: If I leave my company, can I roll over my 401(k) contributions to another tax qualified pension plan?

A: Yes, you can roll over any percentage of a distribution into another qualified pension plan when you leave your company and continue to defer taxes on those savings. Be sure to inquire about your new firm's plan to determine if it will meet your needs. The new plan must be a qualified retirement plan (one that allows money to accumulate on a tax-deferred basis until retirement) that accepts rollovers from other qualified plans. Employees who receive a distribution in the form of a check made payable directly to them will receive only 80 percent of the distribution amount; 20 percent will be withheld against the federal income taxes that may be due as a result of the distribution. Some states require additional withholding for state income tax purposes. Talk to your new employer's plan administrator to find out if the new plan will permit the rollover, if you are eligible, and if the plan's investment options meet your needs.

Q: What happens to my account if I die?

A: In the case of your death, a distribution of your account is made to your beneficiary.

Q: Why should I invest for retirement now?

A: The dollar you save today will be worth more at retirement than the dollar you save next month or next year. This is the power of compound interest at work.


		Contact Info: If you have an additional question that is not answered on our list, please feel free to contact us, and will be glad to respond with answers. Concepts at a glance: - Retirement Facts - 401(k) Advantage - Investment Options

CAPTRUST Financial Advisors, member FINRA/SIPC.