401(k) Secrets You Need To Know

There’s a dirty little secret about 401(k), 457, 403(b) and other retirement plans you may not know. They don’t have to offer you all the tax-saving provisions allowed under law.

These include perks like stretch distributions, plan loans, rollovers into and out of the plan, “still working” exceptions and in-service distributions. You may not always care what those maneuvers are, but in the right circumstances, they can save you and your heirs thousands.

For example, we’ve used stretch distributions to help clients build and preserve retirement plan balances for their children and grandchildren, and in-service distributions are invaluable to provide workers with an escape clause from a toxic company plan.

Retirement expert and IRA guru Ed Slott explains that there are many planning opportunities available to help taxpayers make the most of their savings. But surprisingly, not every company offers them, and in fact, they’re not required to.

“The retirement tax rules are unique in that this is one area of tax law where the actual law is more liberal that what is sometimes actually offered by 401(k)s and other company plans,” writes Slott in a recent Financial Planning magazine article.

The Takeaway: You may have an incredible 401(k) plan at your workplace, or one that leaves much to be desired.

Just understand that every plan is different, and employers are not required to offer all the bells and whistles that the IRS allows. You’ll want to do your homework to see what your plan permits, especially when you’re getting closer to retirement, and need to make decisions about whether to stick with your plan or roll your assets to your own IRA.

 

About Mari Adam

Mari Adam, Certified Financial Planner™ and President of Adam Financial Associates Inc, has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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