The days of feeling like you can depend on social security to get you through your retirement are long gone and they are never coming back. These days, you have to be a whole lot more proactive and disciplined in order to save properly for your retirement than people used to and besides, you never know what is going to happen so it is best to just be prepared. Life expectancy is increasing now for most Americans and they need to be able to afford to take care of themselves after they retire. Many people began contributing to a 401K retirement plan in the 1980s after a tax-free income deferment provision was added to the Internal Revenue Code in 1978.
There are not too many things or transactions that are not taxed in this country so when a way presents itself where you can set aside a portion of your income before it is taxed for savings, you should take advantage. Many people have with their 401K retirement savings plans and anyone who works as an accountant at a CPA firm can attest to this being a great way to save for retirement. The annual limit for tax-free 401K contributions is $17,500 per person, not including the matched contribution from the employer. Employers who offer a 401K retirement plan to their employees often match a percentage of their contributions as an incentive for them to participate.
401K plans are an investment strategy that employs a variety of investment vehicles in order to help someone create and save as much money for their retirement as possible using theirs and their employer’s contributions. Stocks, bonds, mutual funds, individual brokerage accounts and guaranteed insurance contracts are very common offerings that employers choose to make available to their employees. When someone sets up a 401K account through their company sponsored plan, they typically choose investment options and what percentage of their contributions they want to be allocated where. Most 401K accounts are set up to allow money to be redistributed among different investments pretty easily without any kind of hassle or inconvenient paperwork being necessary.
An accounting firm has to be hired to perform a 401K audit when they reach 100 eligible participants. ‘Eligible participants’ may not be what you think though because people who are employed but do not contribute to their 401K and former and deceased employees could be considered eligible participants. Basically, if a separated or retired employee is receiving benefits or eligible to receive benefits, they are still on the books, so to speak. Even deceased employees are on the books still if they have one or more beneficiaries who are receiving benefits or eligible to receive them. So, a company that has been around for a while and has offered and provided a 401K savings plan since the 80s may find that they have over 100 eligible participants even if they have less than 100 employees working for them currently.
Companies with more than 100 eligible participants are responsible for bearing the financial burden of paying for a third-party CPA firm to perform an audit of their 401K plan in order to make sure that employees interests are being protected and represented properly. 401K auditors are Certified Public Accountants (CPA) that have a financial education background and have passed the Uniform Certified Public Accountant Examination that is required in order for them to have attained that title. Their job is to determine whether the company’s 401K plan is being maintained in accordance with the rules and regulations set forth by federal regulators and the Security Exchange Commission (SEC) as well as per the employer agreement.
401K audits are important for the futures of millions of people who are eventually going to depend on the funds that their account is able to generate for their retirement. Some people depend on alternative investments to help them financially prepare for their futures but those who have 401K plans usually rely on their low-risk strategy to help position them to be able to get through their retirement years. Too much regulation can be suffocating in the financial sphere and be counter-productive, but rules that have the best interest of the people who are investing in their futures is a good thing.
In a day-in-age where technology is increasing, medical care is getting better and people are living longer it is important to have a plan in place to help you get through the later stages of your life when you are not going to be able to or want to work. 401K plans being secure are crucial to anyone’s future with these kinds of goals in mind.