Consider switching from a Roth 401k to a traditional 401k when you anticipate being in a higher tax bracket during retirement than you are now. This is because Roth contributions are made post-tax, meaning your contributions are not taxed, but withdrawals in retirement are subject to income tax. In contrast, traditional 401k contributions are made … Read more
Thrift Savings Plan (TSP) and 401(k) plans share similarities in purpose and tax benefits, but there are key distinctions between the two. The TSP is a retirement savings plan specifically designed for federal employees, while 401(k) plans are offered by private employers. Both plans allow participants to contribute pre-tax dollars and enjoy tax-deferred growth until … Read more
If you contribute more than the annual limit to your 401(k) plan, the excess amount will be subject to an excise tax. The tax is 6% per year for each year that the excess amount remains in the plan. Additionally, the IRS may also impose a 10% early withdrawal penalty if you take the excess … Read more
It’s important to be aware that cybercriminals can use sophisticated techniques to steal your 401k savings. They may use phishing emails or fraudulent investment schemes to trick you into giving up your personal information or signing over control of your account. They can also employ advanced technology to intercept or alter communications between you and … Read more
The 401(k) contribution limit includes both employee and employer contributions. The employee contribution limit is the maximum amount of money that an employee can contribute to their 401(k) account. The employer contribution limit is the maximum amount of money that an employer can contribute to an employee’s 401(k) account. The total contribution limit for 2023 … Read more
When you roll over funds from a 401k to an IRA, it doesn’t count as a contribution. This is because the funds were already contributed when they were added to your 401k. Rolling over these funds simply moves them from one retirement account to another. As a result, you don’t need to pay any additional … Read more
If you’re employed and want to save for retirement, you can contribute to both a 401k and a SEP IRA. A 401k is an employer-sponsored retirement plan that allows you to save pre-tax dollars. Your employer may also make matching contributions, which can help you save even more. A SEP IRA is a simplified employee … Read more
Withdrawing money from your 401(k) before a specific age can have tax implications. In the United States, the mandatory age to withdraw from a 401(k) is 59½ years old. If you take a withdrawal before this age, you’ll typically owe income taxes on the amount you withdraw, and you may also have to pay a … Read more
Withdrawing money from your 401k to finance a car purchase is generally not advisable. While it may be tempting to access your retirement savings for immediate needs, it can have significant long-term financial implications. Withdrawing funds before retirement incurs taxes and penalties, reducing your future retirement income. Additionally, taking money out of your 401k may … Read more
Deciding whether to switch your 401(k) to a Roth IRA requires careful consideration. A Roth IRA offers tax-free growth and withdrawals in retirement, but you contribute after-tax dollars now. On the other hand, a 401(k) provides tax-deferred growth, meaning you’ll pay taxes on withdrawals during retirement. If you expect to be in a higher tax … Read more