403(b) plans and 401(k) plans are both employer-sponsored retirement savings plans that offer tax advantages. However, there are some key differences between the two plans. 403(b) plans are typically offered by public schools and other tax-exempt organizations, while 401(k) plans are offered by for-profit businesses. 403(b) plans have higher contribution limits than 401(k) plans, but … Read more
Rolling over a 401(k) into a SEP IRA is a strategy commonly used to consolidate retirement savings and potentially lower investment fees. A SEP IRA is a type of individual retirement account designed for self-employed individuals or business owners with employees, while a 401(k) is an employer-sponsored retirement plan. By rolling over funds from a … Read more
If you need money, you may wonder if you can borrow from your 401(k) plan. The answer is yes, but there are some important things to keep in mind. First, you’ll need to take out a loan from your plan, not a withdrawal. This means you’ll still owe the money back to your 401(k) plan, … Read more
401(k) withdrawals are subject to federal income tax, and in some cases, state income tax. Illinois is one of the states that taxes 401(k) withdrawals. The state’s income tax rate is 4.95%, and it applies to all income, including 401(k) withdrawals. However, there are some exceptions to this rule. For example, withdrawals made after the … Read more
Vested balance refers to the portion of your 401k retirement account that you have ownership and control over. It represents the funds you’ve contributed, as well as any earnings or employer matching contributions that have become non-forfeitable over time. As you work and contribute to your 401k, your vested balance typically increases according to the … Read more
A forfeiture is the loss of some or all of an employee’s account balance in a 401(k) plan. This can occur for a number of reasons, including: * **Premature withdrawal:** If an employee withdraws money from their 401(k) account before they reach age 59½, they may be subject to a 10% early withdrawal penalty. This … Read more
Borrowing from your 401(k) without penalties requires meeting specific criteria. Firstly, you must meet one of the hardship distribution exceptions such as medical expenses, education costs, or a home purchase. Secondly, the loan amount should not exceed 50% of your vested account balance or $50,000 (whichever is less). You will need to repay the loan … Read more
401(k) plans are retirement savings accounts offered by employers to eligible employees. Contributions made to 401(k) accounts by employees are typically made on a pre-tax basis, meaning they are deducted from the employee’s paycheck before taxes are withheld. This reduces the employee’s taxable income, thus lowering their tax liability. In addition to employee contributions, employers … Read more
If you’ve left a job where you had a 401(k) plan, there are a few options for how to collect your money. You can leave the money in the plan and continue to grow it, or you can take a distribution from the plan. If you take a distribution, you’ll have to pay income taxes … Read more
Contributing to a 401k plan can lower your taxable income, offering tax savings. When you make pre-tax contributions to your 401k, the amount you contribute is deducted from your paycheck before taxes are calculated. This reduces your taxable income, meaning you pay less in taxes. However, it’s important to note that when you withdraw funds … Read more