A defined contribution plan is a retirement plan in which the company you work or you (sometimes both) put money into the employees plan sometimes at a rate, such as 5% of annual income. That money is generally invested on the employee’s behalf. At the time of the withdrawal, the amount that the employee will receive is not guaranteed because it fluctuates with the investments. An example of a DCP is a 401(k) plan.
Archive for the ‘Level 2’ Category
A Defined Contribution Plan is…
Tuesday, June 30th, 2009Why should you take money out of your check for a 401k when you won’t be retiring for a long time?
Monday, June 15th, 2009If you just started earning your own money recently, don’t you deserve to spend it all? Although you did earn it and certainly can do whatever you want, it may not be the wisest decision to spend every last dime. Lucky for you, there’s an incredibly easy alternative, and it’s called a 401k.
When you participate in a 401k plan, it basically takes money out of your paycheck and puts it into an account for your retirement fund. 401ks are part of a group of retirement plans known as “defined contribution plans,” because the amount that can be contributed to your retirement is defined either by you (the employee) or your boss. A great thing about the 401k is that when a certain percentage is deducted from your paycheck to put into that retirement savings account, it reduces your take-home pay before taxes are calculated. This means that instead of giving a portion of today’s salary away to taxes, you are putting some of it away in a retirement account instead. Then you pay taxes after you retire when your income and tax bracket is lower.
Sounds too good to be true? 401ks are great, but a main drawback is that if you do want to withdraw the money in your retirement account before you are 59.5 years old, you’ll have to pay taxes on it PLUS a 10% penalty fine to the IRS. Although retirement may sound like something in the very distant future for you, it is something to think about, and having a 401k Plan is an effective and pretty effortless way to have a long-term plan.
Alternatives are…
Wednesday, June 10th, 2009Alternatives are investments other than traditional stocks and bonds, like real estate, start-up companies, and blended funds.
Forex (FX) is…
Wednesday, June 10th, 2009Forex is an international currency market (sometimes called a “foreign exchange market”) where you can buy and sell currencies such as U.S. Dollars, Great British Pounds, Japanese Yen, etc.
A Challenge Grant is…
Tuesday, June 9th, 2009A challenge grant is funding promised to an organization on the condition that it succeeds in raising a specified amount of additional money.
Overdraft is…
Tuesday, June 9th, 2009Overdraft is the amount of money withdrawn from a bank account that is greater than the amount deposited. So if you deposit $4,500, but you withdraw $5,000, you have an overdraft of $500.
A ROTH IRA is…
Friday, May 29th, 2009A ROTH IRA is like a traditional IRA, but the initial investment is with after-tax dollars. This means that you don’t pay taxes when you take the money out after retirement. This makes sense for people who have a low current tax rate but plan to make more money in the future. It also is a good complement to a traditional IRA for people who want to save more, versus less, for retirement.
Why would an organization choose to be a 501c4?
Tuesday, April 7th, 2009A nonprofit organization might choose to file as 501c4 if it wishes to engage in political lobbying or if it does not qualify for 501c3 status because of political activities. Unlike 501c3s, contributions to 501c4s are not tax-deductible, making them less attractive to donors who wish to save money on their taxes.
For example, MoveOn.org – a progressive online advocacy group initially registered as a 501c3 – wanted to lobby Congress freely and run ads for and against certain political candidates, so they registered a separate 501c4 organization and eventually phased out the 501c3 arm of the organization.
A 501(c)(4) is…
Tuesday, April 7th, 2009A 501(c)(4) is a nonprofit organization that is exempt from paying federal income taxes but still has an unlimited ability to lobby and participate in political campaigns and elections. Donations to 501(c)(4)s are not tax-deductible.
An IRA is…
Monday, March 16th, 2009An IRA is an investment account that has tax advantages; IRAs permit you to put in pre-tax dollars for investment. When you take the money out, you are taxed at the prevailing tax rate. Thus, it makes sense for people to wait to withdraw the money until they retire and have a lower tax rate (because they are earning less than they used to).