What is 401(k) retirement savings plan ?

401(k) is a retirement savings plan for a working individual in United States of America. 401(k) plans are sponsored by your employer. In this post you will find out a quick overview of the rules and regulations and the most important things you need to know about 401(k) investments.

401(k) investment options

Money contributed to 401(k) plans is invested in various mutual funds investing in Stocks, Bonds or Money market investments. There are two types of 401(k) plans based on who has control on how the money is invested.

1. Participant-directed 401k plans - These are plans in which as an employee you can choose how much portion of your money is invested in which particular financial instrument. Most 401k plans are of this type.
   
2. Trustee-directed 401k plans- choice of investment options is made by the employer.

It is best to find out from your employer if your plan is indeed of the first type (the most common category).

401(k) tax exemption rules

It is important to understand the tax consequences of your 401(k) contributions. The key points to remember are:

1. Investments in 401(k) plans are tax deferred. i.e. you do not pay income tax on your 401(k) contributions (at the time of the contribution), but you pay tax at the time of withdrawal.
2. The returns on your 401(k) are tax-exempt : You earn from your 401(k) investments in the form of interest or dividend or capital gains. The biggest advantage of 401(k) retirement plans is that these earnings are not taxable.

401(k) rules for early withdrawals

1. Pay income tax on 401(k) withdrawals: As explained above in 401(k) tax rules, you have to pay tax on the 401(k) withdrawal amount when you withdraw money.
   
2. 401(k) hardship withdrawals: Many employers allow 401(k) withdrawals only if there is a financial hardship, e.g. 1) pay medical expenses, 2) pay college tuition fees, 3) for payment or installments etc. in order to avoid eviction or foreclosure of primary residence 4) for funeral of a family member. What exactly qualifies as financial hardship for the case of 401(k) withdrawals is decided by your employer usually based on predetermined criterion.
   
3. 10% Excise tax for premature 401(k) withdrawals: Withdrawals from your 401(k) account before you turn 59.5 years old and (while you are still in service of the company) involves a penalty in the form of 10% excise tax on the withdrawal amount. Note that this excise tax is in addition to the income tax you pay on the invested amount. However you do not have to pay this 10% excise tax in the case when you are leaving your company after you are 55 years old or if you become disabled.
   

401(k) rules for loans

Although direct withdrawals from 401(k) involve a penalty, several (but not all) 401(k) plans allow you to take a loan on your 401(k) contributions at a predetermined interest rates. The 401(k) rules for taking loan (if it is allowed) are as follows.

1. The amount of loan you can avail is the minimum of 50% of your 401(k) balance or $50,000.
2. The 401(k) loan has to be repaid in 5 years, unless it is meant for purchase of a primary residence.
3. In case you take a 401(k) loan and decide to quit your job, you may have to pay back the outstanding loan balance in full. Otherwise the outstanding balance may be treated as a premature 401(k) withdrawal and maybe subject to 10% excise tax as mention above.

401(k) maximum limit rules and regulations

There is a maximum limit on the amount you can invest in all 401(k) plans in a given year and it is the minimum of the following two:

1. The maximum percentage of contribution limit set by your employer.
2. The maximum 401(k) limit as prescribed by the federal government. The 2010 401(k) maximum contribution limit is $16,500 for employees below the age of 50 years and $5,500 for employees over the age of 50.

401(k) Rollover rules and options

You have the following options to deal with 401k contributions in case you retire, quit or change your job and do not want to leave your 401(k) assets with your former employer.

1. 401(k) Rollover Option 1: You can choose to rollover your entire 401(k) contribution to an IRA account, which you will have to setup before the rollover.
   
2. 401(k) Rollover Option 2: You may be able to make a rollover of your 401(k) assets to a retirement savings plan offered by your new employer (which could be another 401(k)).
3. 401(k) Rollover Option 3: You can choose to receive all your 401(k) assets, without making a rollover. However, remember that you will have to pay income tax according to 401(k) tax rules mentioned above. Moreover it is mandatory for your employer to withhold 20% on the amount of your 401(k) withdrawal for Federal Income tax. You are supposed to pay the remaining tax (after this 20% withholding) when you file your income tax return. In addition to the income tax, you also have to pay 10% excise tax if your age is below 59.5 years (as mentioned in 401(k) early withdrawal rules).
   

401(k)- additional benefits like matched contributions

Several employers, as part of their pay-package, match the contributions in 401(k) account. I.e. if you invest $1000, your employer will invest an additional $1000 on your behalf, thus doubling your investment. It is worth finding out if indeed your employer matches you 401(k) contribution by directly asking your employer.

External useful links related to 401(k) contributions IRS 401(k) plan What is Roth 401(k) plan? Additional details on 401(k) withdrawals Learn more about IRA - Individual Retirement Arrangements from IRS website. Income limits on Roth IRA contributions 401(k) fidelity - Fidelity Personal workplace and Investing is the largest provider of 401(k) plans in USA. Other posts related to Tax breaks, tax deductions and tax credits that you may find useful. New Car Purchase Auto Stimulus details explained- Excise and Sales Tax deduction for new purchase of new vehicles. Cars- Cash for Clunkers - Car tax credit when you trade your old fuel inefficient car for a new one and get a rebate of $3500 or $4500. $8000 First Time Home Buyer Tax Credit details- 2009 Housing Stimulus Bill in Economic Plan proposed by Obama. $800 Making work pay tax credit stimulus- details explained ($400 working tax credit for individuals and $800 tax credit for married taxpayers). $250 Social Security Stimulus Check in 2009 Economic Stimulus Package. 2009 Cobra Stimulus Package 65% Reduction in Cobra Health Insurance Premium for qualifying individuals. 2009 Stimulus Checks? Economic Stimulus Payment $1000 Child Tax Credit, Dependent Tax Credit 2009 extension. Disclaimer The author of this web page is neither a legal consultant nor a tax professional. This article on 401(k) retirement savings plan is meant only as a general outline and may contain inaccuracies or errors.

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Maruti Suzuki A-Star review

This article is my own short review of Maruti-Suzuki A-star. This review contains details of A-star price, A-star features, A-star mileage and other factors that you need to consider if you are planning to buy a car. Perhaps before even beginning with the features I should start with

Maruti Suzuki A-star price

A-star comes in 3 variants. Lxi, Vxi, Zxi where Lxi being the base model and Zxi the top end model.

A-star Lxi on-road Price : Rs. 3.8 lakh (base model)
A-star Vxi on-road Price: Rs. 4.08 lakh
A-star Zxi on-road Price: Rs. 4.56 lakh. (top end model)

The prices given above are are on-road prices (i.e. the approximate final price you pay including taxes, insurance etc.) and are approximate. They may vary according to your region and other factors. For ex-showroom prices. Visit official website of A-star.

Three biggest plus points of A-star

1. A-star mileage: A-star gives a mileage of around 20 km / litre (of petrol) (under ideal conditions). This is among the best mileage in the market.
2. A-star is cost-effective: Even the top-end model of A-star, A-star zxi has an on-road price of around 4.5 lakh rupees. This is a very good deal considering the amount of features A-star has. (read below for details).
   
3. A-star reliability: A-star is exported by Maruti-Suzuki to Europe. Nissan buys A-star and resells it as Nissan Pixo. An advantage of this is that A-star confirms to European safety and quality standards. I think of this as a plus point.

The one big disadvantage of A-star

1. A-star space problem (internal design): A-star is small compact car and if you read reviews you will see that a lot of people complain about the shortage of space in the car. Indeed, the luggage space is short and you may find this a problem depending on your needs. As far as the leg-space or space for seating is concerned though, I think this is just fine, unless you are dealing with more than average obese people. So if you are looking for a family car where you want to carry lot of people or lot of luggage, perhaps it may be worthwhile considering other options. Have a look at a picture of the interior space for yourself

There is also another slight disadvantage, however this is a personal opinion. A-star's design is not among the best in the market. Especially the protruding headlights, I really think they could have done better. Compare this with Nissan Pixo, which is A-star car marketed by Nissan in the European markets. Below is how A-star looks. You can decide for yourself if you like it or not.

A-star fuel Options and A-star Mileage

A-star (unfortunately) comes only in the petrol option. Other fuel options like CNG, LPG or diesel would have made A-star an even more attractive choice. A-star gives a mileage of about 19.5 km per litre under ideal conditions (e.g. on highway).

A-star technical specifications and features

All A-star models come with basic features like Air-conditioner, power steering etc (visit A-star specifications for a detailed list).. The high end Zxi comes with a CD player, stereo system with 4 players, dual driver/passenger airbags. The engine capacity is about 1000cc which is slightly lower than other cars int he market, but enough for most purposes.

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New Direct Tax Code in 2011-2012, India

Government of India has proposed a new Direct Tax code or Direct Taxes Code to replace the old Indian Income Tax Act of 1961. This Direct Tax code is an attempt to simply the tax-life of an individual. The way it works is that the income tax slabs are increased, however several deductions (e.g. deduction on housing loan) and tax-breaks are taken away. A detailed post will be written about Direct Tax Code. Below you will find the proposed income tax slabs under the Direct Tax code will be debated in the Parliament and if approved, will be implemented in 2011-2012.

Income Tax rates or Tax Slabs under Direct Tax Code : Table

Direct Tax Code slabs, 2011-2012, Men

Income: upto 1.6 lacs	no income tax
Income : 1.6 lacs to 10 lacs	10 %
Income : 10 lacs to 25 lacs	20 %
Income : above 25 lacs	30 %

Direct Tax Code slabs 2011-2012, Women

Income : upto 1.9 lacs	NO TAX
Income : 1.9 lacs to 10 lacs	10 %
Income : 10 lacs to 25 lacs	20 %
Income : above 25 lacs	30 %

Direct Tax Code slabs 2011-2012, Senior Citizen

Income : upto 2.4 lacs	NO TAX
Income : 2.4 lacs to 10 lacs	10 %
Income : 10 lacs to 25 lacs	20 %
Income : above 25 lacs	30 %

Education cess and surcharge on total income tax

It is not clear whether education cess and surcharge will be applicable on income tax collected under direct tax code. According to the current indian income tax act, in addition to the income tax calculated according to the above income tax slabs, a 3% of Education cess is charged on the total Income tax paid (not on the total taxable income). If the taxable income exceeds Rs. 10 lacs, a 10% surcharge on the total income tax (not on the total taxable income) is also charged.

Posts related to Income Tax rates in India Direct Tax Code Rates 2011-2012 Income Tax Rates for year 2010-2011 Income Tax Rates for year 2009/2010 Income Tax Rates India - Financial Year 2008/2009 and 2009/2010. The IT slabs for 2009/2010 are the same as the slabs in 2008/2009. Income Tax Calculator - 2008/2009 (also good for A.Y. 2009/2010 since the tax slabs are unchanged for 2009/2010). This Income Tax Calculator is in Excel Spreadsheet format. India Income Tax deductions - Various Income Tax deductions under section 80C, section 80D, section 80DD, section 80G, section 80GG, section 80E, section 24, etc. and their max. tax exemption limits allowed under the Indian Income Tax Act discussed in this post. All Indian IT deductions in one single post. Tax deduction under Section 80C: The most common income tax deduction for Indians discussed in detail. Use this for your personal tax planning and save upto Rs. 33,000 Income Tax. How to pay your Indian Income Tax online? How to check your Income Tax Refund Status online?

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Income Tax Rates 2010-2011

Below you will find Indian Income Tax slabs decleared in Budget 2010, for the financial year 2010-2011. These ITslabs have been increased slightly (i.e. the tax rate has been reduced) as compared to the IT slabs for 10-11. Below you will find a detailed table of Income Tax slabs for men, women, and senior citizen. These tax rates are applicable for the financial year 2010-2011, i.e. effective from 1st April 2010 to 31st March 2011.
You may also like to use the quick-easy-to-use this Income Tax Calculator on the website of IT department or download this Tax Calculator (Excel Spreadsheet) for calculating your tax for A.Y. 2010/2011.

Income Tax rates or Tax Slabs 10-11 : Table

Income Tax Slabs 2010/2011 for Men

Income: upto 1.6 lacs	no income tax
Income : 1.6 lacs to 5 lacs	10 %
Income : 5 lacs to 8 lacs	20 %
Income : above 8 lacs	30 %

Income Tax Rates 2010/2011 or Women

Income : upto 1.9 lacs	NO TAX
Income : 1.9 lacs to 5 lacs	10 %
Income : 5 lacs to 8 lacs	20 %
Income : above 8 lacs	30 %

Income Tax rates 2010/2011 for Senior Citizen

Income : upto 2.4 lacs	NO TAX
Income : 2.4 lacs to 5 lacs	10 %
Income : 5 lacs to 8 lacs	20 %
Income : above 8 lacs	30 %

Education cess and surcharge on total income tax

In addition to the income tax calculated according to the above income tax slabs, a 3% of Education cess will be charged on the total Income tax paid (not on the total taxable income). If the taxable income exceeds Rs. 10 lacs, a 10% surcharge on the total income tax (not on the total taxable income) is also charged.
Related: Indian Income Tax Act - Tax Deductions, Tax Exemptions, Section 80C,80D,80DD,80E, etc.

Posts related to Income Tax Rates India Direct Tax Code Rates 2011-2012 Income Tax Rates for year 2010-2011 Income Tax Rates for year 2009/2010 Income Tax Slabs India - Financial Year 2008/2009 and 2009/2010. The IT slabs for 2009/2010 are the same as the slabs in 2008/2009. Income Tax Calculator - 2008/2009 (also good for A.Y. 2009/2010 since the tax slabs are unchanged for 2009/2010). This Income Tax Calculator is in Excel Spreadsheet format. India Income Tax deductions - Various Income Tax deductions under section 80C, section 80D, section 80DD, section 80G, section 80GG, section 80E, section 24, etc. and their max. tax exemption limits allowed under the Indian Income Tax Act discussed in this post. All Indian IT deductions in one single post. Tax deduction under Section 80C: The most common income tax deduction for Indians discussed in detail. Use this for your personal tax planning and save upto Rs. 33,000 Income Tax. How to pay your Indian Income Tax online? How to check your Income Tax Refund Status online?

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New Hyundai i20 - the best car in the market ?

Perhaps the two best appealing features of Hyundai i20 are its design and its mileage. Far more attractive than the predecessor Hyundai i10, i20 has a better design but is also significantly more expensive (see Hyundai i20 price below). Perhaps only Fiat Punto comes close to Hyundai i20 as far as attractive design is concerned. (scroll down to read i20 details)

If you are planning to buy a car, here are some things you should know about Hyundai i20. It is worth investing a few minutes in reading this entire post. Or you may want to

Watch Hyundai i20 review video

Hyundai i20 price and models (Era, Magna, Sportz, Asta)

Hyundai i20 comes in 4 models - i20 Era, i20 Magna, i20 Sportz and i20 Asta. These models and their slight variants are listed below along with their ex-showroom price. The actual price you pay for the car (called as on-road price) is slightly higher because of insurace, taxes and costs for possible additional accessories like door mats, etc. Add about 10% to 20% to the ex-showroom price below and you will get an approximate idea of the onroad Hyundai i20 price.

1. Hyundai i20 Era - Price = Rs. 4.74 lakh
   
2. Hyundai i20 Magna - Price = Rs. 5.14 lakh
   
3. Hyundai i20 Sportz Option - Price = Rs. 5.42 lakh
4. Hyundai i20 Sportz - Price = Rs. 5.57 lakh
   
5. Hyundai i20 Asta - Price = Rs. 6.01 lakh
   
6. Hyundai i20 1.2L Asta Option with Sunroof - Price = Rs. 6.48 lakh
   
7. Hyundai i20 1.4L Asta (Automatic Transmission) - Price = Rs. 7.84 lakh
   

Prices are approximate and may vary from city to city by a small amount. To find out the exact price in your city go to Hyundai i20 Price (don't forget to select i20 before you enter your city).

The Era is the basic model, introduced recently. Asta is the top-end luxury model. Remember these are ex-showroom prices of the cars. So the actual on-road price will be higher (about 10 to 20% depending on various factors). So even the cheapest model is more expensive than usual entry-level hatch-back cars (like Maruti Suzuki Zen, Tata Indica or Hyundai's own Santro or i20).

Hyundai i20 Mileage fuel and engine options

All Hyundai i20 models come in Petrol and diesel variants with one of the following engines.

Engine type & capacity	Gears, Transmission	Mileage (ARAI certified values)	i20 models with this engine option
1.2L Kappa (Petrol)	5 speed, Manual Transmission	18 km/ltr	All models.
1.4L CrDi (Diesel)	6 speed, Manual Transmission	21.5 km/ltr	All models except i20 Asta Option with Sunroof.
1.4L Gamma (Petrol)	5 speed, Automatic Transmission	15.04 km/ltr	Only in i20 Asta model (without Sunroof model).

The values of i20 mileage mentioned above are under ideal conditions, and you can expect to get values close to those on highways. Thus 1.4 Crdi engine will probably give you a mileage of 20km per litre of diesel on highways. The mileage in city will be less depending on various factors. The 1.4Crdi engine has been newly introduced by Hyundai, and especially the basic model i20 Era with this engine option is a very good bargain for those who worry about mileage.

Comparison of Hyundai i20 models - Era, Magna, Sportz, Asta

I will only compare the most important features of the above models. For a detailed list download the following Hyundai i20 brochure.

Feature	i20 Era	i20 Magna	i20 Sportz	i20 Asta
Fog Lamps	yes	yes	yes	yes
Driver Airbag	no	no	yes	yes
Dual Driver/Passenger Airbags (with passenger airbag on/off feature)	no	no	no	yes
Side and Curtain Airbags	no	no	no	yes
ABS with EBD	no	no	no	yes
Power Windows	no	yes	yes	yes
Height Adjustable driver seat	no	no	no	yes
Electrically adjustable ORVM's *	no	no	yes	yes
Body coloured outside mirrors with door handles	no	yes	yes	yes
Alloy wheel with 185/65 R14 tyres	no	no	yes	yes

ORVM = Outside Rear view mirror

In addition to the above all Hyundai i20 models with several features like Air-conditioner, Tachometer, 4 speakers with 2 front tweeters, etc. As mentioned above download Hyundai i20 brochure for a list of all features.

Hyundai i20 Airbags (in i20 Magna and i20 Asta)

The i20 Asta Model comes with a dual passenger/driver airbag in addition to side and curtain airbags. i20 Magna, which comes with a driver airbag, is the only other model to come with the airbag feature. The point is having an airbag increases the cost of your car by about Rs. 50,000 or so (very approximate estimate). Airbags is an important safety feature of a car which try to protect the passengers of the car in case of an accident. The i20 Asta, with fully inflated airbags (in an accident) would look like the following
The airbags in the above picture are inflated within a fraction of second of an accident and may protect the passengers from fatal impact with the car body. Airbags are pretty useless if you are only going to drive the car in the city where car speeds are not very high due to high traffic. However on highways, and long-drives, having such a feature is really worth it in my opinion - if you can afford it of course.

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2010 Extension of First Time Home Buyer Tax credit

Good news for First Time home buyers in 2010. The Economic Stimulus Package of Obama had offered a great incentive to qualified First Time Home Buyers by way of a refundable tax credit of $8000. This incentive has been extended to 2010 for all U.S. Citizens and in certain cases even in 2011 !. Now all qualified home purchases made on or before April 30, 2010 are eligible for $8000 housing stimulus. In order to qualify you only need to sign a binding contract by April 30 2010, and you may complete your home purchase by June 30, 2010. Moreover, certain government employees - Military, Foreign service and intelligence community have one more additional year, that is until April 30 2011 to take advantage of Home buyer tax credit. If you want to read about this tax credit extension in great detail, please visit my Home Buyer Tax Credit and its extension details for a thorough study. For just a brief overview, continue reading this post.

Continue reading if you are a potential home buyer to understand the details and deadlines you need to meet in order to qualify for the refundable tax credit of 8000 USD on your first home purchase.

Do you qualify for 2010 First Time Home Buyer Tax Credit?

The criterion for qualifying for the 2010 home buyer tax credit remain the same as before. Hence, you may be interested in the old article on How to qualify for $8000 Home buyer tax credit for details. Here is a quick list of the criterion, together with the new deadline.

1. You need to be a first time home buyer, which by definition means that you should not have purchased or owned a principal residence anytime in the past 3 years. (either single or joint ownership). If you are married, both you and your spouse need to be first time home buyers.
2. The House must be purchased after November 2009. You need to sign a binding contract on or before Apr 30 2010. The deadline for completing the purchase of the house, once a contract is signed it June 30 2010.
3. In order to qualify for the tax credit, single taxpayers should have income less than $125,000 and married tax payers must have income less than $250,000.
4. Continue reading more details on the offical webpage Housing Tax Credit at a glance.
   

Is there a Home Buyer Tax Credit in 2010, 2011 and beyond?

Some people do qualify for $8000 home buyer tax credit even one year after the deadline of April 30 2010. According to this Federal Housing Tax Credit website, qualified service members who are ordered on a period of official extended duty may be eligible for this additional one year extension. Please visit the link above to know more about Tax Credit in 2011. For general U.S. Citizens, it is unknown whether the housing tax credit will be extended even further, after Apr 30 deadline.

Must Visit - Useful Resources for First Time Home Buyers in 2010

Please take a moment to visit one or more of the following official websites on 8000 housing tax credit stimulus and its 2010 extension.

1. Frequently Asked Questions on Home Buyer Tax Credit
   
2. IRS 2010 Extension of Home Buyer Tax Credit (some current home owners qualify)
   

If there are enough requests, more details of this tax credit will be uploaded. Feel free to post any specific question in a comment.

Federal Tax Breaks, IRS Tax Credits, Tax Rebates in 2009 Economic Stimulus Package and their extensions to that maybe of interest to you Cash for Clunkers - Is it Useful? Will there be a Second Stimulus Plan in 2009 or 2010? 2009 Obama Stimulus Package details explained. New Car Purchase Auto Stimulus details explained- Excise and Sales Tax deduction for new purchase of new vehicles. Cars- Cash for Clunkers - Car tax credit when you trade your old fuel inefficient car for a new one and get a rebate of $3500 or $4500. $8000 First Time Home Buyer Tax Credit details- 2009 Housing Stimulus Bill in Economic Plan proposed by Obama. $800 Making work pay tax credit stimulus- details explained ($400 working tax credit for individuals and $800 tax credit for married taxpayers). $250 Social Security Stimulus Check in 2009 Economic Stimulus Package. 2009 Cobra Stimulus Package 65% Reduction in Cobra Health Insurance Premium for qualifying individuals. 2009 Stimulus Checks? Economic Stimulus Payment $1000 Child Tax Credit, Dependent Tax Credit 2009 extension. FAQ: Can you claim your $8000 first time home buyer tax credit in 2008 tax return itself or do you have to wait till you file 2009 tax return? The law allows any qualified purchases made in 2009 to be treated as if the purchase was made on December 31 2008. You can claim the $8000 first time home buyer tax credit in 2008 tax return itself by filing form 5405 according to the latest IRS ruling. Thus you can get the benefit of $8000 in 2008 tax return itself. Income Tax tip for first time home-buyers: If you know you qualify for the $8000 home buyer credit there is no need to wait to file your 2009 tax return in order to get benefit of this housing stimulus. First time home buyers are actually permitted to reduce their income tax withholding by the amount equal to housing credit, i.e. $8000. You can then use this 'extra cash' got by increase in your take home pay for down-payment ! Question (please answer in a comment): Was this article on First Time Home Buyer Tax Credit useful? Did it help you to decide if you qualify for the housing stimulus? Disclaimer The author of this web page is neither a legal consultant nor a tax professional. This article on first time home buyer is meant only as a general outline and may contain inaccuracies or errors. Please consult the official website of Federal housing tax credit for accurate information on this housing tax credit.

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