For those seeking to prepare for retirement while employed at a public school or college, maximizing savings can be done through both 401(k) and 403(b) plans. While these plans provide tax advantages, it’s important to understand the specific contribution limits and rules for each. By exploring the details of these plans and optimizing your contributions, … Read more
A Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees and members of the uniformed services. TSPs are similar to 401(k) plans, which are offered by many private employers. Both TSPs and 401(k)s allow employees to save and invest money for retirement on a tax-advantaged basis. However, there are some … Read more
Increasing contributions to a 401(k) plan can significantly reduce your federal income taxes by lowering your Adjusted Gross Income (AGI). Here’s how it works: * **Lower AGI:** Contributions to a traditional 401(k) are made on a pre-tax basis, meaning they are deducted from your gross income before federal income taxes are calculated. This reduces your … Read more
To find your 401(k) contribution on your W2, locate the box labeled “Wages, tips, other compensation.” This box represents your total taxable wages before any deductions, including your 401(k) contribution. Next, look for a line or box labeled “401(k).” The amount listed here is the total amount you contributed to your 401(k) account during the … Read more
Withdrawing funds from your 401(k) before reaching age 59½ can result in financial penalties. In addition to paying income tax on the amount withdrawn, you’ll also face an early withdrawal penalty of 10%. This penalty applies to any non-qualified distributions, meaning withdrawals that aren’t made for certain specific reasons, such as becoming disabled or taking … Read more
Your W2 form, issued by your employer, summarizes your annual earnings and deductions for tax purposes. It typically includes information such as wages, tips, and taxable benefits, but generally does not include contributions made to retirement plans like a 401(k). 401(k) contributions are deducted from your paycheck before taxes, reducing your taxable income. They are … Read more
Cashing out your 401k before reaching age 59½ can lead to hefty penalties. The penalty is a 10% early withdrawal penalty, which means you’ll pay a flat 10% tax on the amount you withdraw. In addition, your withdrawal will be added to your other income and taxed at your marginal income tax rate. This double … Read more
To determine your 401(k) contribution per paycheck, you need to first decide the percentage of your paycheck you wish to contribute. Then, multiply your gross pay by that percentage. The result is your total contribution for the pay period. For example, if your gross pay is $1,000 and you decide to contribute 10%, your contribution … Read more
When you contribute to a 401(k) plan, the money you put in is deducted from your paycheck before taxes are taken out. This means that you pay less in taxes now, and the money you contribute grows tax-free until you withdraw it in retirement. To deduct your 401(k) contributions on your taxes, you will need … Read more
In general, employers are not required to approve 401(k) loans. 401(k) loans are subject to specific eligibility criteria set by the plan document, which is the legal agreement that governs the plan. These criteria may include factors such as the participant’s years of service, loan amount, and loan repayment period. Ultimately, the decision of whether … Read more