Employer Specific 401k Programs
A 401k retirement plan allows a person to set aside regular contributions for his or her retirement. The employee has the freedom to choose how much he or she wants to set aside for his 401k plan, although the amount of yearly contribution does have an upper limit. The employers, on their part, will match their employees’ 401k contributions.
A 401k retirement plan is actually company-specific. It is designed and set up by a company for their own employees. Thus 401k plans can actually vary from one company to another. Due to this variety of 401k plans, job applicants or those who have received a job offer from a company usually factor in the company’s 401k scheme in their decision to apply or accept the job being offered.
Companies’ 401k plans vary from one another on various points or criteria. The most obvious differences usually lie in the match percentage that the company will give its employers. For instance, one company can offer to contribute to an employee’s 401k fund four percent of this employees’ yearly contribution; other companies can offer less or more than this base match percentage.
Another point of comparison among companies’ 401k plans is their match contribution tiers. The longer the employee stays in a company, the more the company contributes to the employee’s 401k fund. Employers can contribute a quarter of an employee’s contribution the moment this employee reaches his or her third year with the company. When an employee has been with the company for 10 years, however, some employers can even give more than (say, 150 percent of) the employee’s pledged contributions.
This only means one thing – loyalty to a certain employer usually means greater match contributions. However, the essential first step is to choose your employer well. Assuming that all other factors are equal between two companies that you are considering, choose the company that will provide you with a great 401k retirement plan.
It is also helpful to note that the contributions made by your employer to match your own 401k contributions do not count towards your annual contribution limit (your 401k contributions should not exceed a certain maximum figure) should the contribution be lower than 6% of your gross salary before tax calculation is applied.
When Changing Employers
If you quit your present job, you can still continue making your contributions towards your 401k plan with your previous employer. In some cases you may be required to make a payment through the plan administrator with fees for retaining your 401k record account with them. It may be better, however, to simply roll over your plan to your next employer. You may also maintain separate accounts with your past and current employers or even consolidate the plans into an IRA account.
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