Make Your 401K Plan a Strategic Asset

The reduced cost will not have an impact on your service. In fact, we will exceed your service expectations. We will help you to eliminate the messy fiduciary nightmare that comes along with managing your company’s 401K. We will also provide a very personalized service by sending team members to your company during initial enrollment to help educate you and your employee’s on the new plan. As your investments change, we will use ongoing market research to weed out underperforming funds, which will help optimize your returns. The personalized service does not stop there… we will continuously make ourselves available to you and your employees for any type of 401K need.

401(k) & IRA Tips

Individual retirement accounts (IRAs) have a lot in common with employer-sponsored retirement plan accounts like 401(k)s, but differ in many important ways. Let’s take a look.

IRA vs 401(k): How are they different?

The subtle, but important, differences between IRAs and 401(k) accounts arise when answering the questions below.

  • Where do contributions come from and how are they handled from a tax standpoint?
  • How are early distributions treated?
  • When are federal taxes withheld automatically?
  • When do Required Minimum Distributions (RMDs) begin?

IRA vs 401(k): How are they alike?

The subtle, but important, differences between IRAs and 401(k) accounts arise when answering the questions below.

  • The main similarities include tax-deferred growth possibilities, as both traditional IRAs and 401(k)s generally offer tax-deferred earnings from interest income, dividends, and capital gains. They also offer the potential to reduce your income tax burden, although in different ways.
  • Both may also offer the possibility of taking hardship distributions for items like unreimbursed medical expenses, medical insurance, disability, qualified college expenses, or first-time home purchases. Generally, hardship distributions are limited to the amount of your contributions or deferrals. Some distributions are taxed and typically also incur a 10% early-withdrawal penalty if taken prior to the age of 59½.

IRA Early Distributions

Distributions from traditional IRAs are subject to specific requirements. Generally, a distribution taken before the age of 59½ is subject to a 10% early distribution penalty. The penalty no longer applies once you reach 59½. However, all distributions are taxed as ordinary income. In the case of a Roth IRA, distributions made before age 59½ are not taxed or penalized provided the amount withdrawn is smaller than what you contributed.

401(k) Early Distributions

Distribution options from a 401(k) plan vary based on your age and employment status. Unlike an IRA, you can’t take a distribution from a 401(k) whenever you feel like it. To take out money, you need to have what’s called a "distributable event," such as leaving your employer or retiring.

When you leave an employer or retire, you have to decide what to do with the money in your 401(k). Generally speaking, you can 1). roll the money over into an IRA or another employer-sponsored retirement plan, 2). take a “lump-sum” distribution (that is, “cash out” your account), or 3). do nothing, and leave the money in your former employer’s plan. If you cash out your plan, that money will be taxed as regular income in the year you take the distribution. Like the traditional IRA, pre-tax 401(k) contributions taken before age 59½ may be subject to a 10% early withdrawal penalty.

If you haven’t had a distributable event, but still want to access money in your 401(k) account, you may be able to borrow the needed funds. Many, but not all, 401(k) plans offer loan provisions. If you qualify for a hardship distribution, this may also be an option under your plan.

Ready To Make The First Step In Planning Your Retirement?

Making the steps to planning your retirement can be overwhelming. Let us help you create a plan that takes advantage of all the benefits retirement accounts can offer. Southport Capital’s retirement planning professionals and team are committed to helping investors define their financial goals for a secure retirement and creating a customized plan to achieve them.

Contact us for a review on your current retirement planning strategy, and let us help you cultivate a long term plan that works for all your retirement needs.

Cash Balance Points

A cash balance plan is a defined benefit plan that defines the promised benefit in terms of a stated account balance or “hypothetical account” instead of a monthly pension payable at specific retirement age.


  • Substantial benefits can be provided and accrued within a short time – even with early retirement
  • Employers can contribute (and deduct) more than under other retirement plans
  • Easier for participants to understand because benefits are expressed in hypothetical account balances
  • Vesting can follow a variety of schedules from immediate to spread out over three years
  • Benefits do not have to be dependent upon asset returns


  • Most expensive form of plan
  • Most administratively complex plan
  • In almost all years, a contribution must be made
  • Employee benefits cannot be retroactively reduced
Who Contributes
Generally, the employer makes the most contributions. Sometimes, employee voluntary contributions may be permitted.
Contribution and Benefit Limits
Benefits provided under the plan are limited. Generally, the benefit limits are higher than those allowed in Defined Contribution Plans. An Enrolled Actuary is needed to determine the Contribution and Benefit Limits.
Filing Requirements
Annual filing of Form 5500 is required. An enrolled actuary must sign the Schedule SB of Form 5500.
In-service Withdrawals
Generally, a defined benefit plan may not make in-service distributions to a participant before age 62.
How do cash balance plans differ from 401(k) plans?
Cash balance plans are defined benefit plans. In contrast, 401(k) plans are defined contribution plans. There are four major differences between typical cash balance plans and 401(k) plans: Participation – Participation in typical cash balance plans generally does not depend on the workers contributing part of their compensation to the plan; however, participation in a 401(k) plan does depend, in whole or in part, on an employee choosing to contribute to the plan. Investment Risks – The investments of cash balance plans are managed by the employer or an investment manager appointed by the employer. The employer bears the risks of the investments. Increases and decreases in the value of the plan’s investments do not directly affect the benefit amounts promised to participants. By contrast, 401(k) plans often permit participants to direct their own investments within certain categories. Under 401(k) plans, participants bear the risks and rewards of investment choices. Life Annuities – Unlike 401(k) plans, cash balance plans are required to offer employees the ability to receive their benefits in the form of lifetime annuities. Federal Guarantee – Since cash balance plans are defined benefit plans, the benefits promised by cash balance plans are usually insured by a federal agency, the Pension Benefit Guaranty Corporation (PBGC). If a defined benefit plan is terminated with insufficient funds to pay all promised benefits, the PBGC has authority to assume trusteeship of the plan and to begin to pay pension benefits up to the limits set by law. Defined contribution plans, including 401(k) plans, are not insured by the PBGC.