a.Execute the research necessary to understand the basic structure of a 401K plan. Write a brief summary of your findings.
b.How much did Advanced Ideas, Inc. put into Sally’s 401K in her first two years?
c.How much will Sally contribute to her own 401K
during her third year?
a. To understand the basic structure of a 401K plan, you can start by conducting research. Begin by searching for reputable sources such as financial websites, government resources, or articles specifically dedicated to explaining 401K plans. These sources will provide you with a comprehensive overview of the structure, benefits, and rules associated with 401K plans.
Some key aspects to understand about a 401K plan include:
1. Purpose: A 401K plan is an employer-sponsored retirement savings plan intended to help employees save for their retirement.
2. Contributions: Both the employee and the employer can contribute to the 401K plan. Contributions made by the employee are typically deducted from their paycheck, while employer contributions may vary.
3. Contribution Limits: There are annual limits on how much an employee can contribute to their 401K plan. The limits are set by the Internal Revenue Service (IRS) and may change over time.
4. Tax Benefits: Contributions to a 401K plan are typically tax-deferred, meaning they are not taxed until withdrawn during retirement. This can provide potential tax benefits.
5. Investment Options: 401K plans often offer a range of investment options, such as mutual funds, stocks, and bonds. Employees can choose how their contributions are invested based on their risk tolerance and investment goals.
6. Vesting: Some employer contributions may be subject to a vesting period, which refers to the length of time an employee must work for the employer before being entitled to the full amount.
Remember to consult reliable sources and consider multiple perspectives when conducting your research to ensure a well-rounded understanding of the topic.
b. To determine how much Advanced Ideas, Inc. put into Sally's 401K in her first two years, you will need access to Sally's 401K plan statements or records. These records should include details about the employer contributions made on her behalf.
Start by reaching out to Advanced Ideas, Inc.'s human resources department or the plan administrator responsible for managing the company's 401K plan. They should be able to provide the necessary information regarding Sally's contributions in her first two years. You may need to provide proof of your authorization to access this information, such as a signed consent form.
c. To find out how much Sally will contribute to her own 401K during her third year, you will need to determine the contribution rate or percentage that Sally has chosen to allocate from her salary towards her 401K. This information can be obtained from Sally's 401K plan documents or by contacting the plan administrator.
Typically, the contribution rate is expressed as a percentage of the employee's salary. Multiply Sally's salary for her third year by the chosen contribution rate to calculate her annual contribution. Keep in mind that there may be annual contribution limits imposed by the IRS that could affect the maximum amount Sally can contribute.
Remember to maintain the privacy and confidentiality of Sally's personal financial information throughout your research process.