A 401(k) retirement plan advisor educates and provides guidance to help participants in choosing the best plan for their needs and to improve chances of a successful retirement fund.

A 401(k) Plan is a qualified retirement plan in which an employer permits an employee to defer receipt of part of his or her compensation by contributing that part to his or her account in the 401(k) Plan. This is a paycheck deduction for the employee and is completely voluntary. Typically, a company will have a match of some sort as a benefit to the employees. The match is typically 50 cents on the dollar up to 6% of pay, thereby capping any potential match at 3% of payroll. The maximum payroll deduction for 2015 was $18,000 with a $6,000 catch-up provision for those ages 50+, and in 2016 the deferral limit is also $18,000 with the same catch-up amount.

The following is a table of 401(k) contribution limits:

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan. Also, you may be eligible for a credit for contributions to your Achieving a Better Life Experience (ABLE) account, if you’re the designated beneficiary.

Depending on your adjusted gross income reported on your Form 1040 series return, the amount of the credit is 50%, 20% or 10% of:

  • contributions you make to a traditional or Roth IRA,
  • elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan,
  • voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan,
  • contributions to a 501(c)(18)(D) plan, or
  • contributions made to an ABLE account for which you are the designated beneficiary (beginning in 2018).

401(k) Retirement Plan Advisors

401(k) Financial Advisors

We find that many people come to us because of the overwhelming quantity and conflicts in the financial industry. Most people do not have the time or interest to sort through it all and find the best solution for their needs. You can be confident that the 401(k) Financial Advisors at Full Focus Financial will put your needs first and will be proactive when it comes to saving you money. We will stay on top of and make sure to keep you informed of trends in the retirement plan industry, conduct vendor reviews and comparisons, and suggest changes based on new or updated laws. A 401(k) retirement plan advisor has the experience and training to make informed decisions for you.

If the following comment from your CPA sounds familiar to you, then your CPA is similar to most clients we talk with:

“Put money in your 401(k)/Profit Sharing Plan and pay taxes on the rest. If you want to take home more money, you need to make more money.”

We have found that very few CPAs are proactive when it comes to saving their clients money on taxes. Most CPAs simply process tax returns and are so busy that they do not have time to meet with individual clients to work on a true income tax reduction plan.

Are Qualified Plans Tax-Hostile or Tax-Favorable?

While most people think it’s a good idea to fund a “tax-deferred” qualified retirement plan; many times that’s NOT the case. In fact, tax-deductible qualified retirement plans can be more tax-hostile than tax-favorable.

You may have had someone ask you if it is better to pay taxes on the harvest or the seed? What this question is asking you is whether it is a better idea to pay income taxes now on your current income (the seed) if you could let that money grow tax-free and be removed tax-free later in retirement, or is it a better idea to let your money grow tax-deferred for year in a qualified retirement plan and then pay income taxes on ALL of the money that is withdrawn (the harvest).

We’ve run the numbers and for most clients under the age of 60, paying taxes on the seed while letting your money grow tax-free and come out of a wealth-building tool tax-free in retirement will be much better than simply income tax-deferring money the traditional way through a 401(k) or other tax-deferred qualified plan.

To learn how you can build a tax-favorable retirement nest egg outside of a qualified retirement plan, contact our 401(k) retirement plan advisors.

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