Could I lose my 401(k) retirement like the employees of Enron?
The short answer to that question is no.
All investments are subject to what is called "Market Risk." That is when the stock market fluctuates and we see gains and losses in our accounts. The Enron employees that we saw on the news had placed themselves at a greater market risk by investing most, if not all, of their 401(k) payroll contributions into Enron stock. (Note: The Enron 401(k) plan had other investment options and we did not hear about the employees who had diversified).
While you do not have company stock in your 401(k) plan, it is a good idea to limit your holding of any publicly traded company to no more than 10% of your total portfolio.
When am I eligible for the catch-up provision of the 2001 tax law?
Any individual who has reached age 50 by the end of the plan year and who has already made the maximum allowable elective deferral to a retirement plan or IRA may make an additional pre-tax catch up contribution.
401(k) Plan Table IRA Table Year $1,000
What happens to my 401(k) money if the company I work for declares bankruptcy?
The funds in a retirement plan are protected under law.
Bankruptcy isn't necessarily the end of a 401(k). If a company declares bankruptcy under Chapter 11 reorganization, it is expected that the company will continue to operate. It is likely that the company 401(k) will continue also. If the judge overseeing the bankruptcy reorganization discontinues the plan, the employer contributions become fully vested to you and upon liquidation of the plan you will receive the vested balance. You could then roll the money to an IRA to keep your tax advantage. If you cash in your 401(k) you will owe tax on the entire amount of the distribution plus a 10% tax penalty if under the age of 59 ½ .
What is the new tax credit for contributions to retirement plans and IRA's?
Beginning in 2002, if you make eligible contributions to an employer-sponsored retirement plan or to an IRA, you may be able to take a tax credit. The amount of the saver's credit you can get is based on the contributions you make and your credit rate. Your credit rate can be as low as 10% or as high as 50%, depending on your adjusted gross income. The lower your income, the higher the credit rate. To find out if you qualify for "Saver's Credit Rate" go to www.irs.gov or consult a tax advisor.
