Determining whether to prioritize contributions to a Health Savings Account (HSA) or a 401(k) plan depends on various factors, including age, health, and financial goals. For younger individuals with few health expenses, maximizing 401(k) contributions may be beneficial for long-term retirement savings. However, for those with higher healthcare costs or a higher risk of medical … Read more
The maximum 401(k) employee contribution limit is a set amount each year. This limit includes both employee pre-tax contributions and any employer matching contributions. In other words, if an employer makes matching contributions, the employee’s maximum contribution limit is reduced by the amount of the match. Understanding how these limits work can help employees optimize … Read more
Vesting in a 401k plan refers to the period when your employer’s contributions to your retirement account become fully yours. When you’re vested, you have ownership of these funds, regardless of whether you stay with the company or leave. Vesting typically occurs over several years, with a certain percentage becoming available each year. Understanding vesting … Read more
When you withdraw funds from your 401(k) account before you reach age 59½, you’ll pay a 10% early withdrawal penalty tax on top of the regular income taxes you owe. This means that if you withdraw $10,000, you’ll pay $1,000 in taxes, even if you’re in a low tax bracket. There are exceptions to this … Read more
Vanguard Total Stock Market Index Fund (VTI) is a low-cost, broadly diversified index fund that provides exposure to the entire U.S. stock market. It is one of the most popular 401(k) investments due to its low expense ratio, broad diversification, and long-term track record of performance. VTI tracks the performance of the CRSP US Large … Read more
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