To submit accurate taxes, you’ll need specific documents related to your 401(k) retirement plan. These documents provide crucial information about your contributions, distributions, and account balances. The Form 1099-R reports taxable distributions from your 401(k). The Form 5498 summarizes your contributions, earnings, and account balance. For traditional 401(k)s, you may also need Form 1099-DIV, which … Read more
Withdrawing money from a 401(k) retirement plan before reaching age 59½ typically results in a 10% early withdrawal penalty and possible income taxes. The penalty is applied regardless of why you’re taking the money out — it could be to pay for college, buy a home, or any other reason. If you’re under age 59½ … Read more
Moving an Individual Retirement Account (IRA) to a 401(k) is generally not possible. Typically, you can only contribute to a 401(k) through payroll deductions from your employer. However, there are a few exceptions to this rule. For instance, some employers allow employees to roll over IRA funds into their 401(k) plans. Additionally, if you leave … Read more
Moving funds from a 401(k) to a certificate of deposit (CD) is possible without incurring immediate taxes. This can be done through a direct rollover, where the balance of the 401(k) is transferred directly into the CD without going through your personal bank account. This type of transfer is not considered a taxable event, as … Read more
Consider reassessing your 401k contributions if you face financial hardship, have high-interest debt, are nearing retirement, or have alternative investment options with better returns. However, if you have a stable income, low debt, a long investment horizon, and limited alternative investments, continuing contributions to your 401k can be beneficial. It provides tax savings, employer matching, … Read more
You can roll over funds from a traditional 401(k) to a Roth IRA, but it’s important to understand the tax implications. When you make a traditional 401(k) contribution, you get a tax break on the money you contribute. However, when you withdraw money from a Roth IRA, it is tax-free. So, when you roll over … Read more
Borrowing from a 401k is possible, but there are limits on how much you can withdraw. The amount you can borrow depends on several factors, including your income, your account balance, and the rules of your specific 401k plan. Generally, you can borrow up to 50% of your vested account balance, with a maximum loan … Read more
Withdrawing your entire 401k is a significant financial decision that can have long-term implications. Generally, early withdrawals before age 59½ are subject to a 10% penalty, plus regular income taxes. Exceptions may apply for certain qualifying reasons, such as disability or hardship. However, it’s crucial to understand that withdrawing your 401k funds prematurely can disrupt … Read more
Figure out how much you can afford to contribute to your 401(k) each paycheck by considering your budget, financial goals, and risk tolerance. Aim to contribute as much as you can comfortably afford to maximize the tax benefits and long-term growth potential. If possible, take advantage of any employer matching contributions to further boost your … Read more
Required Minimum Distribution (RMD) refers to the mandatory yearly withdrawals you must take from your 401(k) plan once you reach a certain age. These withdrawals are meant to gradually deplete your retirement savings and are subject to income tax. The minimum age for taking RMDs is 73 for individuals born before January 1, 1951, and … Read more