401K Financial Planning

Richard D asked:

I see many questions on here regarding 401K’s which i assume are available in the United States.

They sound quite similar to Regulated Complying Superannuation Funds in Australia.

I have worked in the Superannuation industry in Australia so I understand in detail how Australian super funds work and the rules relating to them.

I am specifically looking for information on how a 401K works and, if anybody knows about both superannuation funds and 401K’s, what the similarities/differences are.

If you only know about 401K’s then please put down what you know and I will be able to work out the differences and similarities.

My understanding is that 401K’s are retirement savings accounts which are preserved until age 62 except in certain circumstances (much the same as a super fund).

In the US does your employer make contributions into this account for you? Are the contributions compulsory? Is insurance available?

The more info the better.

Cheers
Are there any concessional taxation rules for contributions? How are fund earnings taxed?

Are benefits based on a formula (e.g. % multiplied by salary at retirement) or are they simply contributions accumulated with interest?

How are benefits taxed?


Question posted courtesy of: Randy

rainbow asked:

What happens to my 401k plan if I decide to leave USA and go back to Indonesia. I have my 401k plan for about 5 yrs. What are the consequences and how should I save from getting penalised ? I am resident in USA and 35 yrs of age.


Question posted courtesy of: Monica