401(k) FAQs

Yes, it’s possible to lose money in a 401k. The value of your investments can fluctuate based on market conditions. If the market experiences a downturn, your investments could lose value, resulting in a loss when you withdraw funds. It’s important to diversify your investments within the 401k to minimize risk, and to consider your age and investment goals when making decisions. Remember, 401ks are long-term investments, and it’s common for market fluctuations to occur over time.
Market Volatility
The value of your 401(k) investments can fluctuate based on market conditions.

Generally, 401(k) plans are protected from garnishment. This means that creditors cannot take money from your 401(k) to satisfy debts, such as unpaid taxes or child support. However, there are some exceptions to this rule. For example, if you have a court order to pay alimony or child support, your 401(k) may be garnished.

There are potential penalties for withdrawing funds from a 401k before the age of 59.5. The primary penalty is an early withdrawal penalty of 10% on the withdrawn amount. This penalty is assessed by the Internal Revenue Service (IRS) and is applied to both federal and state taxes. The penalty does not apply if the funds are used for certain qualified expenses, such as a down payment on a first home, medical expenses, or higher education costs.

A former spouse may be entitled to a portion of your 401(k) retirement account even after a divorce, if the account was earned during the marriage. The specific laws governing the division of 401(k) accounts in a divorce vary from state to state, and it is important to consult with an attorney to determine your … Read more

Generally, you can’t withdraw funds from your 401(k) account while you have an outstanding loan. Taking out a loan against your 401(k) involves borrowing money from your own retirement savings and using the funds for other purposes. Until the loan is repaid, the amount you borrowed remains as an outstanding balance, and you’re restricted from … Read more

Bankruptcy can generally protect your 401(k) savings. 401(k) plans are considered retirement accounts, and most are protected from creditors in bankruptcy. However, there are some exceptions. For instance, if you have taken out a loan against your 401(k), the outstanding loan balance may be considered an unsecured debt and could be discharged in bankruptcy. Additionally, … Read more

Yes, it is possible to have both a traditional 401(k) and a Roth 401(k). They have different rules and benefits. Traditional 401(k) contributions are made pre-tax, reducing current income and potentially lowering taxes now. However, withdrawals in retirement are taxed as ordinary income. Roth 401(k) contributions are made post-tax, meaning they are not deducted from … Read more

Individuals are permitted to establish numerous 401(k) accounts, each linked to a distinct employer. However, it’s essential to understand that the annual contribution limit applies collectively to all 401(k) accounts, regardless of the number of accounts held. The IRS sets the contribution limits annually, and for 2023, the limit for individuals under age 50 is … Read more

Yes, you can contribute to both a Roth IRA and a 401(k) plan simultaneously. A Roth IRA is an individual retirement account that allows you to make after-tax contributions, meaning you pay taxes now but your withdrawals in retirement are tax-free. A 401(k) plan is an employer-sponsored retirement plan that allows you to make pre-tax … Read more

When considering moving your 401(k) to another broker, several factors come into play. Firstly, check if your current and prospective brokers allow rollovers or transfers. Then, compare fees, investment options, and customer service to determine which broker aligns with your financial goals. It’s crucial to consider potential tax implications, such as early withdrawal penalties or … Read more