Investment portfolios: Build one without a broker?
Trent HammThe Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.
Since I live in central Iowa , regularly get involved with campaigns both locally and nationally, and sometimes switch my party affiliation based on which poltiical field I’m most passionate about, it’s not surprising that I’m being flooded with mail and phone calls from candidates who want me to participate in the Republican Straw Poll next weekend.
The Straw Poll, for those who are unaware, is an event hosted by the Iowa Republican Party where presidential candidates come and attempt to whip up support with an informal vote that’s supposed to give some sense as to what the field of candidates looks like. Mostly, it’s an afternoon of entertainment.
I really consider myself an independent, so I often change party affiliation based on which candidates I’m most interested in influencing the standing of. Since the 2012 election doesn’t have much going on with the Democrats … I’m a Republican, for now.
(I don’t know who I will vote for. That’s half the fun of going, though, isn’t it?)
Q1: Why pay down 0% debt? - Randall
The reason for making extra payments on a 0% debt is to free up your cash flow.
Even though the interest rate on a debt is 0%, making the minimum payment on that debt is still a monthly requirement. Month in and month out, you still have to make that payment. Paying it off eliminates that requirement.
Why not just invest it? For one, many people don’t have the self-control unless they have a goal that they’re saving for. If the money’s there without a purpose, why not spend it? For another, there are many situations where it’s better to not have savings, such as if you’re getting ready to apply for financial aid.
Q2: Retirement planning for highly compensated I am 36, single, no kids, own my home and have two roommates who pay me rent. I earn $110K a year, and I max my 401(k) and Roth IRA. I have no debt except the mortgage (5.5%, 250K on it, last refinanced in 2004). My home is worth about $500K and I’ve owned it since 2001. I plan to stay indefinitely, both in the home and in the area, as my parents are nearby. My 401K has about $230K in it, and my Roth IRA has $29K. My take home pay is around $4300/monthly. I put $500 into my emergency fund monthly, and it has about 6 months of take home pay (around $24K). My job is quite stable. I also have a “new car fund” that I am putting $300 into monthly. My car, a 2007 Honda , is paid off, and I anticipate I will have enough to pay cash for the next car in about 6-8 years. I also tithe 10% to my church and other ministries.
Highly Compensated Employee - News
I just received a letter from my employer saying that I am designated as a “highly compensated employee” (HCE) because my income was just over $110K in 2010. Because I am an HCE, I am now only allowed to contribute 10% of my gross income (about $11K),
Employees making a lower salary would pay a smaller percentage toward their health benefit premiums, while highly compensated employees will be forced to pay a higher percentage. But municipalities may not see those savings right away.
Highly compensated employees in fast-growing industries such as technology, bio-tech, etc., want to be offered disability insurance as part of a comprehensive health/benefits package. There are five key decisions an employer needs to consider when
And recent news reports have highlighted a handful of very highly compensated workers, including the now-retired UConn police chief, who was paid more than a quarter-million dollars, and the former chancellor of the community college system,
Highly compensated employees faced virtually no chance of losing their jobs in about half a dozen large agencies. Even in an era of massive budget deficits, reorganizations last year resulted in only 385 federal employees losing their jobs.
401k Limits for Highly Compensated Employees
Ost people never need to worry about a special category of limits on 401k contributions. As a matter of fact, most people don’t even know that this category exists. However, those who have found themselves included in the highly compensated employees (HCE) category, learn quickly about the additional limits that are placed on their 401k contributions.
What Constitutes Highly Compensated EmployeeIn order to be considered a highly compensated employee, the employee must make over $110,000 per year (2011) AND be in the top 20% of earners within their company. So even if you are the highest paid person working at your company, if you make less then $110,000 annually, then the limits do not apply to you.
Understanding 401k Contribution LimitsMoney contributed to a 401k plan is done so tax free. Therefore, in order to keep people from money, there are limits imposed on how much can be contributed per year. In 2011, the maximum individual contribution per year is $16,500. In addition to an individual contribution, employers can make matching contributions. So if an employer pays a 50% matching contribution, and the employee contributed $10,000, then the employer would contribute an additional $5000.
However, the maximum amount that an employer is allowed to contribute is 6% of the employes compensation (salary). So to use nice round numbers, if an employee earns $100,000 per year, the maximum an employer can contribute is $6000. With the 50% match program mentioned before, if an employee were to contribute the full $16,500 per year, the employers matching contribution would be $8250, however for a $100,000 per year earner, that would exceed the 6% limit, therefore the most the employer could contribute would be $6000. This would make the contribution for the year $22,500.
Individuals can contribute to their 401k on an after tax basis. The maximum total contribution for a calendar year is $49,000 or 100% of their salary (compensation), whichever is less.
Additional Limits for Highly Compensated EmployeesIn addition to the limits set for all individuals mentioned above, HCE’s are subject to further limitations on their 401k contribution limits . For someone who falls into the category of a highly compensated employee, meaning they make over $110k and are in the top 20% of earners in their company, the total contribution that an employer can make is limited. The limit is based on the employers overall 401k participation rate. The contribution to the pool of HCE’s can not be more then 125% of the average of all on the non-HCE’s contributions. So the amount of the contribution is really dependent on how many non-highly compensated employees are participating in the companies 401k plan.
Highly Compensated Employee - Bookshelf
Qualified retirement and other employee benefit plans
[D] Family Aggregation of Highly Compensated Employees For plan years ... A " family aggregation" rule applies to a highly compensated employee who owns 5 ...Employee Benefits
If highly compensated employees receive any benefits that are not available to ... Using the previous example, assume a highly compensated employee receives ...Income Tax Regulations, Winter 2008 Edition
A highly compensated employee who receives a no-additional cost service, a qualified employee discount or a meal provided at an employer-operated eating ...Tax management portfolios
If a Highly Compensated Employee participates in two (2) or more plans maintained by ... For each Highly Compensated Employee, the amount of excess Employer ...J.K. Lasser's Your Income Tax 2008, For Preparing Your 2007 Tax Return
If a self-insured plan is deemed discriminatory, rank-and-file employees are not affected; only highly compensated employees are subject to tax. ...Helpful Guide Directory
TSC - Employee Definitions
We provide 401k's, employee stock ownership plans, cafeteria plans, profit sharing and ... The identity of the highly compensated employees is to be determined on a controlled ...
401(k) - Wikipedia, the free encyclopedia
If the less compensated employees are allowed to save more for retirement, then ... "highly compensated employees" (HCEs) and compares them to non-highly compensated ...
Highly Compensated Employees
The term "highly compensated employee" means any employee who ... A former employee shall be treated as a highly compensated employee if ...
Fact Sheet #17H: Highly-Compensated Workers and the Part 541 ...
A highly compensated employee is deemed exempt under Section 13(a)(1) ... Thus, for example, an employee may qualify as an exempt highly-compensated executive if the employee ...
Highly Compensated Employee Definition
Highly Compensated Employee - Definition of Highly Compensated Employee on Investopedia - For employer-sponsored, tax-advantaged retirement plan purposes, anyone who ...