Employer contributions to a 401k plan generally do not count towards the annual contribution limit set by the Internal Revenue Service (IRS). This limit is the maximum amount of money that an employee can contribute to their 401k plan each year on a pre-tax basis. Employer contributions are typically made on a post-tax basis, meaning … Read more
Deciding how much to contribute to your 401(k) retirement plan is a crucial financial decision. While there is no one-size-fits-all answer, a common recommendation is to aim to contribute between 10% to 15% of your pre-tax income. This amount strikes a balance between saving adequately for retirement while still meeting current financial obligations. However, you … Read more
The maximum amount you can contribute to your 401(k) plan each year is set by the Internal Revenue Service (IRS). For 2023, the 401(k) contribution limit is $22,500. This limit applies to both employee contributions and employer matching contributions. If you are age 50 or older, you can make catch-up contributions of up to $7,500. … Read more
At the age of 30, you’re still a ways away from retirement. You have time to ride out market swings. So, you can afford to take some risks with your 401k investments. A good rule of thumb is to allocate around 70% of your portfolio to stocks. This will give you the potential for higher … Read more
Withdrawing from your 401(k) early might sound tempting, but it’s not without consequences. If you withdraw before reaching age 59½, you’ll typically face a 10% early withdrawal penalty. That means for every $1,000 you take out, you’ll lose $100 to the IRS. Plus, the withdrawn amount will be taxed as income, potentially pushing you into … Read more
Many people consider borrowing money from their 401(k) retirement fund to buy a house. While it’s possible to do this, it’s important to understand the risks and benefits involved. One of the main benefits of borrowing from a 401(k) is that the interest rates are often lower than those on other types of loans. Additionally, … Read more
Withdrawing funds from your 401k before age 59½ can result in penalties. However, certain exceptions allow for penalty-free withdrawals, such as using the funds for qualified expenses like a first-time home purchase, qualified higher education costs, or certain medical expenses. Additionally, there may be options available to withdraw funds in cases of financial hardship, such … Read more
401(k) withdrawals can affect Social Security benefits. Withdrawals before age 59½ are subject to a 10% penalty, which is not included in taxable income. However, the amount withdrawn is included in your “adjusted gross income” (AGI). AGI is used to determine your Social Security benefits, so withdrawals can reduce your benefits if they increase your … Read more
Rolling over a 401(k) into a Roth IRA can be a beneficial financial move, allowing you to access tax-free earnings in retirement. To initiate a rollover, contact your current 401(k) provider and request a direct transfer to your Roth IRA account. Ensure that the funds are classified as a “direct rollover” to avoid any tax … Read more
**Reporting 401k Contributions on Tax Return** **Step 1: Gather Documentation** * Form 1099-R from your 401k account * Any employer contributions made on your behalf **Step 2: Determine Taxability** **Traditional 401k Contributions:** * Pre-tax contributions are deducted from your paycheck and not included in your taxable income. * Withdrawals are generally taxable as income when … Read more