What You Need To Know About A 401(K)
There are many different types of 401(k)’s that you should know about. Only with this knowledge will you be able to discover what is best for you.
First of all, if you are the owner of a company then you should consider a solo or individual 401(K). This type of 401(K) has higher contribution levels, lower administrative costs and less paperwork. Furthermore, you can save as both the employer and the employee here. In case you have put off saving for your retirement, then this type of 401(K) may be particularly helpful since you can put away up to $44,000 ($49,000 if you are 50-years-old or older) as an employer and $15,000 as an employee. However, if you are going to hire employees soon then you will have to move to a traditional 401(K), which will have greater costs and lots of paperwork to do.
Secondly, there are traditional 401(K) plans that are offered to employees of larger companies. While some small companies will offer this type of plan, many fear that this will be too costly. Usually these costs are less than you expect them to be though. For instance, if you have a business with less than 30 employees you will only have to pay about $3,000 per year for administrative costs that are related to a 401(K) plan.
Both types of 401(K)’s have similar features like tax-deferred growth of your money and the ability to borrow from your account.
