AUSTIN

609 Castle Ridge Road
Suite 315
Austin, Texas 78746
Office:     512.494.1003
Fax:         512.233.5353

SAN ANTONIO

7373 Broadway, Suite 108
San Antonio, Texas 78209
Office:     210.826.2424
Fax:         210.579.7177

FAQs

Q. What is a 401(k)?
A.

A 401(k) plan is a tax-deferred investment and savings plan that acts as a personal pension fund for employees. It allows employees of corporations and private companies to save and invest for their own retirement. In a 401(k) plan, you authorize pre-tax payroll deductions to be invested in mutual funds or other investment options offered by your company's plan. Both the contributions and the investment earnings can grow tax-deferred until withdrawal (assumed to be retirement) at which time they are taxed as ordinary income.  
Q. How does a 401(k) work?
A. A 401(k) is a fairly simple plan. The plan is established by your employer as a set contribution retirement agreement. That means you are the one who pays into the plan, although your employer and the plan provider who offers your 401(k) do just about all the work. Your 401(k) contribution is automatically deducted from your paycheck each pay period. This money is taken out and invested before your paycheck is taxed. After you have decided what percentage you want deducted from your check, and how you want to invest it, your work is pretty much done. Once the money is deducted from your paycheck, you cannot spend it, but it is yours. It grows in your personal 401(k) account. Although you can withdraw the money for certain emergencies or in some cases borrow against your investment, the money is intended to stay in your account until you are at least 59 ½.

While the investment is growing in your 401(k) account, you do not pay any taxes on it. When you withdraw the money at retirement, you pay taxes on the amount you withdraw from your account (so you pay taxes little by little instead of being hit with one big bill). In some cases, your employer makes a contribution to your 401(k) plan. This is an option for your employer and they are not required to make a contribution. If they do chose to make a contribution, it takes the form of an employer match on your contribution. Usually the employer matches a certain percentage of your contribution. For example, an employer may elect to put in 50 cents for every dollar you contribute. That is an immediate return on your contribution, regardless of how you invest your 401(k) money. This contribution can be anywhere from a small percentage to an exact match of your contributions.
Q. What are the advantages to a 401(k) plan?
A. There are many advantages to 401(k) plans:
 
  • The employee is able to contribute to his or her 401(k) with pre-tax money which reduces the amount of tax withheld from each paycheck.
  • All employer contributions and any growth in the investments are tax-free until withdrawal in a Traditional 401(k).
  • The employee can decide where to invest future contributions and/or current savings, allowing control over the investments to the employee.
  • If your company matches your contributions, it is equivalent to receiving extra money on top of your salary.
  • Unlike a pension, all contributions can be moved from one company's plan to the next company's plan, or a rollover IRA, should a participant change jobs.
  • While the 401(k) is similar in nature to an IRA, an IRA won't enjoy any matching company contributions and personal IRA contributions are subject to much lower limits.
Q. What are the disadvantages to a 401(k)?
A. There are a few disadvantages associated with 401(k) plans:
 
  • It is difficult (or at least expensive) to access your 401(k) savings before age 59 ½ .
  • Employer contributions are usually not vested (i.e. do not become the property of the employee) until a number of years have passed.
  • Each year, the Internal Revenue Service sets a maximum contribution limit for 401(k) accounts. For the 2010 tax year, the employee contribution limit is $16,500 if under 50 years of age and $22,000 (catch up) if over.
Q. What are some of the investment options for my 401(k)?
A. Participants in a 401(k) plan have a number of investment options with Titleist Asset Management, Ltd. using no-load mutual funds and ETFs with low expenses and a solid long-term performance record. Each plan can also be customized for participants to self-direct investments into stocks, bonds, mutual funds, CDs, options, commodities, private limited partnerships, limited liability companies, and real estate.

The employee chooses how to invest their money and is typically allowed to change where the money is invested and/or where future contributions will go a specific number of times per year. This may be quarterly, bi-monthly, or some similar time period. The employee is also typically allowed to stop contributions at any time.
Q. What are the fees associated with a 401(k) Plan?
A. Our fees typically range from 0.75% - 1.50% annually based on assets under management and the number of plan participants. There are zero hidden fees and all compensation is 100% transparent. We will work with your current Third Party Administrator (TPA) or help locate a TPA that is most suitable for the plan's structure and requirements.