When you withdraw money from your 401(k) account, it is subject to taxes and may also be subject to a 10% early withdrawal penalty if you are under age 59½. The amount of taxes you pay will depend on whether you take a traditional or a Roth withdrawal. Traditional 401(k) withdrawals are taxed as ordinary … Read more
IULs and 401ks are both retirement savings accounts, but they have some important differences. An IUL is a type of life insurance policy that offers a cash value account that grows at a fixed rate. The cash value account is invested in stocks and bonds, and the growth rate is determined by the insurance company. … Read more
Forfeiture in a 401k occurs when an individual fails to satisfy the vesting requirement and loses their employer-provided contributions. Vesting schedules vary, but typically the employer’s contributions become fully vested after a certain number of years of service. If the employee leaves their job before becoming fully vested, they may lose the employer’s contributions that … Read more
401k contributions made by employees can lower their modified adjusted gross income (MAGI). This is important because MAGI is used to determine eligibility for certain government programs and tax credits. By reducing MAGI, individuals may qualify for higher benefits or lower tax liability. For instance, lowering MAGI can increase eligibility for Medicaid, the Children’s Health … Read more
A contingent beneficiary for a 401(k) plan is a person or entity that will receive the remaining account balance if the primary beneficiary passes away before the account owner. Designating a contingent beneficiary ensures that your retirement savings will be distributed according to your wishes if the primary beneficiary predeceases you. It’s important to review … Read more
401k contributions lower an individual’s adjusted gross income (AGI) by reducing their taxable income. AGI is the amount of income subject to federal income tax, and contributions to a 401k plan are not included in this calculation. By making 401k contributions, individuals can reduce their taxable income, potentially resulting in lower income tax liability. This … Read more
Calculating the required minimum distribution (RMD) for your 401(k) account is crucial to avoid penalties. The RMD is the minimum amount you must withdraw from your account each year after reaching age 72. To calculate your RMD, first determine your account balance as of December 31 of the previous year. Then, divide this balance by … Read more
401(k) contributions directly lower your Adjusted Gross Income (AGI). This is because the money you contribute to your 401(k) is taken out of your paycheck before taxes are calculated. This means that you pay less in taxes on your income, which reduces your AGI. The lower your AGI, the less you pay in taxes. Additionally, … Read more
Withdrawal from a 401(k) plan prior to age 59 1/2 generally incurs a 10% early withdrawal penalty in addition to ordinary income tax. The penalty applies to any amount withdrawn that exceeds the amount contributed on a post-tax basis. Additionally, if the withdrawal is made before age 55, the employee may also be subject to … Read more
If you make the mistake of putting too much money into your 401(k), you’ll run into a tax issue called an excess contribution. You will owe an extra 6% income tax on the amount that you have over contributed. You’ll also be charged an extra 6% each year that you don’t remove the excess amount. … Read more