Advantages of a Profit Sharing 401k Plan

If you want to start putting more money into your retirement fund, then you might consider opening a profit sharing 401k plan. There are many reasons to consider a profit sharing plan, rather than setting up other types of investment portfolios. Looking at these reasons carefully may help you decide if you want to move into this kind of retirement account.

Tax Deferral

New tax legislation now offers a real tax deferral opportunity. The deduction is in fact an improvement on the old SEP IRA deferment. You could wait for a month of more as the IRS decides whether you can defer the earnings. In the profit-sharing 401k, these deferrals are made automatically.

Access to Money

Unlike other forms of 401k, the profit sharing account is more flexible with your money. With other types of plans, you can only take out small amounts of money. With these plans, you can use the money for other financial ventures. More specifically, you can purchase life insurance. There is a limit on the insurance of up to 25 percent.