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US pensions

Payments to 401K :

- Pros

Arriving to the US, you have sure been surprised that your pension... counts on you. For the many of us, the delights of this end of the life is at our charge for at least 70% !

This is why, the retirement and pension plans by capitalisation are essentials. The 401K is the the remedy to the almost certain bankroute of the pensions systems of the G7's countries in 2020 - 2040. Your contributions are kept at the source (it's less painful) and these funds are invested in the "mutual funds" of your choice. In general, the choice of the "mutual funds"  is limited (5 to 10 options are offered). They are managed by an external company to your company. You will have to decide on the repartition of your contributions. (the funds are in obligations or index on the national or international markets). This money is not taxable by the federal institution or by the state which allows you to profit from the whole of your salary before tax (in some limits) unti lit's use (cf. down this page).

An interesting measure when you analyse a jop offer is the contribution of your company to your own contributions (also called 'matching').

When you invest $1 in the 401k, your company will increase your contributions by giving a percentage. For example, 50 per invested dollar until 4% of your salary before tax. Some companies are more generous on this subject than others. The best conditions encountered until now are dollar for dollar until 6%  ("Nations Bank").

- The limits

Oui, Unortunatly, there are some:

You cannot contribute to more than 15% of your salary before tax with a maximum of 10k$/year. Those which investments exceed the limits will be subject to income tax on the investment part superior to 10k$. This limit is the ones of your contributions, not the ones given by your company. For example, you invest $10,000 and your company adds 50%. The total is $15,000 non taxable.

It's possible to borrow from your own pension fund. The limit is set up to 50% of available funds. You will have to pay interest to yourself.

The money is not available before you reach 57.5 years. Unless you can proove that you have financial problems.

The limits are applied to the individual; a married couple can then contribute to $10,000 per person.



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