Individual 401(k) Plan

The Individual 401(k) plan provides good returns on your funds and helps you become financially stable and secure even after you retire. A greater number of Americans are opting for the Individual 401(k) Plan to enjoy better benefits in the long run.

Greater emphasis is being put on the individual 401k plans in view of the present recession. By opting for the Individual 401k account, you can prevent yourself from being heavily affected due to this economic down slum. Ideally, you need to make a proper retirement planning to make your post retirement period financially secure. Proper planning for retirement helps you bag good benefits and also have sufficient money to maintain a descent standard of living. The Individual 401(k) account is a major part of your retirement planning and you need to have a proper idea of its features before opting for one.

For opening an Individual 401(k) account under Individual 401 k plan, one needs to attain at least 21 years of age. He or she should have also worked for at least one year for a period of 1,000 hours from the date of hire.

If you are covered under the Individual 401(k) plan, you are allowed to decide whether your earnings will be deferred to the account or directly paid into it. The plan is usually an employer sponsored program. Both the contributions of the employer and the employee are combined in the plan. There are also companies which provide you with the benefits to purchase a number of stocks under the plan. Self employer persons can also opt for this Plan.

If you are working or younger than 59½ years of age, your money will be liable to taxes. Apart from this, an additional excise tax amounting to around 10 % of the amount that will be distributed will also be imposed.

The individual 401(k) account of a person remains active even if he or she leaves the job. The account will be active all over the life of that person. After you attain the age of 70½ years or more, you need to withdraw the money. It should be done within the first of April each year. If you want, you can as well change your 401(k) account into an IRA or Individual Retirement Account. Your 401(k) account that you already have can also be changed into a new individual 401k plan if you join some new job.

In most cases, the deadline that is applicable in case of the Individual 401(k) accounts is the last day of the fiscal year.