FICA, the Federal Insurance Contributions Act, is a payroll tax that funds Social Security and Medicare. Generally, employer 401(k) contributions are not subject to FICA taxes, as the contributions are made on a pre-tax basis. This means that the employee does not pay FICA taxes on the money that is contributed to their 401(k) plan … Read more
Quitting your job can trigger the question of accessing your 401(k). The ability to withdraw depends on several factors. Generally, you must be at least 59½ to make penalty-free withdrawals. However, if you leave your job before 59½, there are exceptions. You can withdraw without penalty if you meet specific conditions, such as becoming disabled … Read more
When you retire, your 401k withdrawals are subject to income taxes. This is because the money you contributed to your 401k while working was pre-tax. This means that you didn’t pay taxes on that money when you earned it. However, when you withdraw the money from your 401k in retirement, it is considered taxable income. … Read more
Withdrawing money from a 401(k) plan before reaching age 59½ usually comes with a 10% penalty tax. This penalty is in addition to any income taxes you may owe on the amount withdrawn. The penalty tax is designed to encourage people to save for retirement and not to tap into their retirement savings early. However, … Read more
Fidelity 401k plans offer a variety of investment options, but the level of insurance coverage for these plans varies depending on the investment choices made. While the FDIC (Federal Deposit Insurance Corporation) typically insures deposits held in FDIC-member banks up to $250,000, FDIC insurance does not typically cover investments in 401k plans. 401k plans are … Read more
To avoid penalties when borrowing from a 401k, you must meet specific requirements. The loan must be used for certain purposes, such as buying a home or educational expenses. You must repay the loan within a set amount of time, typically five years. The loan amount cannot exceed half of your vested account balance, up … Read more
Roth 401k contributions are not tax-deductible like traditional 401k contributions. Instead, they are made with after-tax dollars. However, the earnings grow tax-free and can be withdrawn tax-free in retirement. This can be a significant benefit, especially if you expect to be in a higher tax bracket in retirement. Roth 401ks are a good option for … Read more
A hardship withdrawal from a 401k is a way to access your money early if you have a severe financial hardship. There are specific situations that qualify as a hardship, such as medical expenses, preventing eviction or foreclosure, or funeral costs. The amount you can withdraw is limited to the amount needed to cover the … Read more
Forfeitures in a 401k plan refer to the employer contributions that are forfeited by participants who leave the company before completing a specific vesting period. Vesting is the process by which employees gradually gain ownership of employer contributions over time. Forfeited contributions are reallocated to the remaining plan participants, typically based on their account balances … Read more
Mandatory withdrawal from a 401(k) plan typically occurs upon reaching a certain age. The age for mandatory withdrawal varies by plan, but is usually between 70½ and 72. At this time, you must start taking required minimum distributions (RMDs) from your 401(k). RMDs are a minimum amount that you must withdraw from your account each … Read more