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401K is a Guaranteed Investment Day One of 25% +

– the real numbers are incredible – and depend on your marginal tax rate and source of funds to make the Personal Contribution you make,

and also that of the employer – who can make a matching contribution and elect to utilize leverage when it suits cash flow preferences.

Irrespective of whether a worker’s contribution comes directly from your pay packet, from your personal savings, out of your 401k fund or from an external lender the investment is tax deductible. Thus there is tax rebate as a reward.

Without shaving results for when State & Local Taxes apply – for a $19,000 Personal Contribution employees are entitled to approximately $5,000 rebate.

Unstead of percentage that rebate on $20.000 (rounding up) do the calculation on the net outlay $15,000. Hence for an outlay of $15,000 the profit of $5,000 produces an ROI of 33%,

To enhance the ROI use borrowed funds to make your contribution – say 5% (choose a rate you are comfortable with). The cost of 12months interest is $1,000. However you only will need tje

Many employers do not match the entire contribution of an employee – which is equivalent to leaving money on the table.

Even if an employer baulks at contributing from profits or capital of the company there is a way they can match employee contributions with it costing the employer nothing. Additionally it is oprtionally also possible for employers to make money from the exercise or for them to JV (joint venture with employers or external businesses)

When a worker has made a contribution to their 401k fund it is then permissible for the employer to make a matching contribution.

The best financial result comes from both parties making the maximum contribution allowed under IRS Guidelines (currently $19,500 for each – totalling $39,000).

An employee who agrees to salary sacrifice can double the full capital value of the investment and produce another tax rebate – bigger than that for the employees personal own contributions

Apart from the early gains from tax savings on contributions – producing tax exempt rebates of 25% TO OVER 33% BEFORE FACTORING IN THE LEVERAGE, – leverage amounts to 20:1 when a 5% interest charge is made. major long term benefit is all investment earnings from 401k Funds are tax sheltered,

on exit you can legally avoid tax on all earnings on the investments and on all contributions; then you can obtain a tax deduction on all the untaxed proceeds – which also can be leveraged at 20:1 and more games later

further tax benefits can apply as you go further – like a never ending story – but you need to know the rules and what you can do with leverage and arbitraging tax differentials

Though a solo 401(k) takes little paperwork to set up, you should be aware that once your plan exceeds $250,000 in assets, you must file Form 5500 with the IRS every year, according to Jim Shagawat, a certified financial planner in Paramus, N.J.

If your employer offers a 401(k) plan, it can be one of the easiest and most effective ways to save for your retirement. But while a major advantage of 401(k) plans is that they let you put a portion of your pay automatically into your account, there are some limits on how much you can contribute.https://49efc465f6694bb4cb98f33fa663b77a.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Each year, usually in October or November, the Internal Revenue Service (IRS) reviews and sometimes adjusts the maximum contribution limits for 401(k) plans, individual retirement accounts (IRAs), and other retirement savings vehicles. On Oct. 26, 2020, the IRS made updates for 2021.1https://49efc465f6694bb4cb98f33fa663b77a.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html 

The federal income tax filing due date for individuals has been extended from April 15, 2021, to May 17, 2021. Payment of taxes owed can be delayed to the same date without penalty.2 Your state tax deadline may not be delayed.3

KEY TAKEAWAYS

  • Employees can contribute up to $19,500 to their 401(k) plan for 2020 and 2021.4
  • Anyone age 50 or over is eligible for an additional catch-up contribution of $6,500 in 2020 and 2021.
  • The general limit on total employer and employee contributions for 2020 is $57,000 (catch-up at $63,500) in 2020. In 2021 that amount rises to $58,000 (or $64,500 with the catch-up contribution).1

Basic Limits

The basic employee contribution limit for 2020 is $19,500, and this limit includes all elective employee salary deferrals as well as any after-tax contributions made to a designated Roth account within your 401(k) or a special Roth 401(k) plan.5 

The same contribution limits apply to 403(b) plans and most 457 plans, as well as to the federal government’s Thrift Savings Plan. All of the basic limits remain the same in 2021.1

If you have multiple 401(k) accounts, your total contributions to all of them—both traditional and Roth—can not exceed that $19,500 limit. Any contributions you make to other types of retirement accounts, such as IRAs, do not affect your 401(k) contribution limit.https://49efc465f6694bb4cb98f33fa663b77a.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html 

To encourage workers nearing retirement to speed up their savings, the IRS allows 401(k) participants ages 50 and over to make additional contributions beyond the standard contribution limit.5

If you are age 50 or older, you can kick in an extra $6,500 catch-up contribution in 2020 for a total of $26,000. This amount remains the same in 2021.1

Employer Contributions

Another big benefit of participating in a 401(k) plan is that your employer may contribute to it as well. Many employers match employee contributions by adding, for example, 50 cents or $1 for every dollar the employee contributes.

Employers can also make elective contributions regardless of how much or little the employee contributes, up to certain limits. The general limit on total employer and employee contributions for 2020 is $57,000, or 100% of employee compensation (subject to a max of $285,000), whichever is lower. For workers age 50 and up, the base limit is $63,500 ($57,000 plus the $6,500 catch-up contribution).6

i) Tax Rebate for Personal Contribution

An investment of close to $20,000 can give a Rebate of around $5,000

Taxpayers postpone paying income tax on contributions to their traditional retirement accounts, like a 401(k). (It’s the opposite for Roth IRAs, where you pay tax on the contributions but withdrawals will be tax-free.) The higher your income, the higher the value of your tax deduction.

For example, a taxpayer in the top marginal tax bracket of 37% receives a $37 tax benefit for every $100 contributed. But a taxpayer in the bottom, 10% bracket only gets a $10 tax benefit for the same contribution,

  • ii)

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