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401K Maryland

While a 401(k) plan isn't a magic guarantee that if you participate you will be able to retire in Tahiti at age 55, it can be a major part, perhaps even the most important part, of your retirement planning strategy. For many people in Maryland, especially those who do not own homes, their 401(k)'s can be their biggest assets.

1. Local Companies

2. The Tax Reform Act

3. Your 401(k) Plan is Tax-Deferred

4. Your 401(k) Plan Can Protect You

5. Featured National Company

1. Local Companies

Silex Karl H CPA
(410) 825-4860
100 W Pennsylvania Ave
Towson, MD

Nyh Bookeeping & Consulting Llc
(410) 763-7989
225 S Aurora St
Easton, MD

Austin McGill Group Llc
(410) 836-8888
20 S Main St
Bel Air, MD

George C Hayes CPA Tax & Financial Services
(410) 666-4500
14307 Jarrettsville Pike
Phoenix, MD

Nicewarner David E CPA
(301) 682-4416
Frederick, MD

Rutland Marshall E CPA
(301) 948-0802
11800 Quince Mill Dr
North Potomac, MD

Helmick Beth
(301) 271-7033
121 E Main St
Thurmont, MD

Goloskov Accounting Services Inc
(410) 838-9555
615 W MacPhail Rd
Bel Air, MD

Rollins Timothy D CPA
(301) 786-4591
Silver Spring, MD

Pietsch Alfred CPA
(410) 987-5014
490 Procopio Cir
Millersville, MD

2. The Tax Reform Act

401 plans were first authorized by a section of The Tax Reform Act that Congress passed in 1978. It took several more years until the actual regulations were put into place. So beginning in 1982, taxpayers were able to begin making contributions to their plans for the first time. It wasn’t until 1991, however, that the final regulations were published.

The name of the program comes from the place where it is listed in the Internal Revenue Service tax code: section 401, paragraph (k).

Not every employee in Maryland is eligible; those who work for tax-exempt organization, such as churches, public schools, or hospitals cannot participate. But for these employers, there are similar 403(b) plans available.

But the basic idea of each plan is the same: your employer deducts a certain percentage of your gross earnings from each paycheck and puts it into a retirement plan for you. Its all done automatically, with the amount deducted reported to you on each paycheck stub.

3. Your 401(k) Plan is Tax-Deferred

Your automatic deductions are done on a pre-tax basis. This doesn’t mean that they are “tax free,” it just means that you don’t pay taxes on these amounts until, ideally, you are at least 59 and ½ years old, you retire, and you start to receive distributions from your plan. (There are certain instances in which you can receive distributions from your plan before you are 59 and ½ years old, but you generally want to do this unless you have to.)

The tax-deferred contributions are invested in securities or stocks and are then allowed to grow until they are withdrawn when the participant retires. Unlike regular stock market investments, you are not faced with paying capital gains taxes when your 401k investments increase in value.

What does this mean right now, when you are making contributions to your plan? It means that your employer is reporting a lower adjusted gross income to your employer. Although you’re still making the same amount of money, according to the IRS, you’re making a smaller amount of taxable income and your tax liability is lowered. This reduces the amount of taxes you must pay at the end of the year.

For example, suppose that you receive a paycheck for $1,000. If you put $50 of that amount into a 401 k plan, your taxable income is only $950.

This is often considered one of the major benefits of a 401(k) plan. If you contribute enough to the plan, you might even put yourself into a lower tax bracket. In addition, because certain IRS credits, such as child tax credits, depend on a worker’s adjusted gross income, you may even lower your taxable income enough to be eligible for additional credits, while saving for retirement at the same time.

Because you lower your adjusted gross income when you contribute to a 401(k) plan, you also lower the amount of state taxes you must pay (if your state has a state income tax).

Of course you have to pay taxes on this income when you retire. But since incomes often drop when people retire, you may be in a lower income bracket by then and pay less in taxes.

4. Your 401(k) Plan Can Protect You

With pension plans from employers now a rarity, the 401k-retirement savings plan may well be the main source of retirement income for many people in Maryland. Utilize your human resources department to make sure you know what is available to you for retirement options, and that you understand your available benefits. Don’t wait for them to come to you, because they probably won’t.

Few middle- and low-income people are able to buy significant amounts of stocks and bonds on their own; most don’t have a broker. Few will have Certificates of Deposits or large amounts of savings. Few in this category are able to put money into 402 plans, or even understand how to utilize them.

Of course, there are always Social Security payments. But if you rely exclusively on that, you’re very likely to be disappointed. Social Security payments can be as low as several hundred per month. And unless the government radically changes the rules in the future, you’re not likely to receive more than a few thousand dollars a month from Social Security payments, regardless of how much you earned during your lifetime.

If you have to live on Social Security alone, that could represent a radical drop from your pre-retirement income. You don’t want to go from a middle-class lifestyle to poverty. Many of us dream that we’ll be better off after we retire; few of us realize that without careful planning things could be worse.

5. Featured National Company

AXA Advisors

Your Life... Your Way. Plan It. Live It.

610.606.0569
1525 Valley Ctr Pky
Bethlehem, PA
www.thomasmarino.myaxa-advisors.com

For business owners, we offer a range of services - group benefits, qualified retirement plans, and deferred compensation programs. We structure defined contribution plans like: 401(k), SEP IRA, SIMPLE IRA, 401(k) with safe harbor provisions, Profit-sharing, Money purchase, and ERISA 403(b).
We work with individuals and design a financial strategy that is specific and unique to the client’s needs. We focus on three key factors that could affect the portfolio’s ability to generate income during retirement: Asset Allocation, Withdrawal Amounts, and the Sequence of Market Returns. We help protect assets upon death, establish educational funding, and help secure retirement. We understand that you’ve worked hard to earn your money.

Read more about 401K

- Certificates of Deposit Maryland

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- Certificates of Deposit Maryland

Related Local Event

Brazil Economic Conference
Dates: 10/13/2008 - 10/13/2008
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401K Maryland

1. Local Companies

2. The Tax Reform Act

3. Your 401(k) Plan is Tax-Deferred

4. Your 401(k) Plan Can Protect You

5. Featured National Company