The capital comes from the employee's deposits, typically a percentage of his salary and often a payment from the employer. The employee is free to decide the amount of his contribution, within the limits of an annual ceiling. In 2012, up to $17,000 can be capitalized for employees under the age of 50, $22,500 from age 50. This portion of the salary will benefit from deferred taxation: it will not be included in the income tax calculation for the current year, subject only to withdrawals.
Withdrawals
401K Plan Benchmarking Virginia are designed to provide income during the retirement years. The retired investor will make withdrawals spread according to his needs and his life expectancy. The retiree will be liable for income tax for the sums received.
In order to discourage withdrawals before the age of 59 and a half, the amount is subject to a fixed tax of 10%, in addition to the taxation normally applied (exceptions: cases of death, total and irreversible disability, layoff from the age of 55, change of benefit clause of the plan in the case of a divorce, major medical expenses exceeding 7.5% of the taxable income). Since the income tax rate is progressive, taxes on possible early withdrawals can be punitive.
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