401k AND PROFIT SHARING PLANS
A 401k/profit sharing plan allows a business owner and his/her employees to save substantial dollars for their retirement to a maximum amount, which is determined annually.
Contributions are deductible from both state and federal taxes.
The money accumulates on a tax-deferred basis and is taxed as regular income at retirement.
There are numerous funds to choose from, and choices vary from plan to plan.
Loans up to 50% of one's account, to a maximum of $50,000, are allowed.
Hardship withdrawals are allowed, but are subject to a 10% penalty tax prior to age 59.5, and are added to an individual's taxable income.
Employer profit sharing contributions of up to 25% of covered payroll (matching or discretionary) are allowed, but are not required.