Most workers in the United States have access to a defined contribution plan. It is essential to know the details of corporate retirement plans offered at your company before choosing one. Here are four questions to ask.
Will the company match your contributions? If the company matches your contributions, this will significantly increase the value of a retirement account. It is common for an employer to match a percentage of your contribution. The contribution by the employer may be limited by the plan or by the Internal Revenue Service’s standards. Assuming your company has one, try to contribute the maximum of your company’s match.
What are the investment options with corporate retirement plans? It is common for retirement plans to allow various investment options, like stocks, bonds, and mutual funds. If you feel unhappy with the options, it may be possible to transfer a percentage of your plan to a different retirement account, known as a partial rollover.
When does the employee become vested? All the money you put into your retirement account is yours to keep. However, the funds contributed by your employer may be subject to a vesting requirement. Standard vesting schedules are cliff and graded. It is essential to know the details before deciding.
When can you take out your money? When most people take out money from a retirement account before they are 59 ½ years old, they must pay a 10% penalty tax. However, hardship exemptions may prevent you from paying the tax, like suffering a disability, certain medical expenses, purchasing your first home, or adopting a child.
