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A third-party administrator (TPA) plays a significant role in managing 401(k) plans. They handle various tasks, including recordkeeping, investment administration, and participant communication. The TPA ensures compliance with regulations and provides support to plan sponsors and participants. They process contributions, maintain participant accounts, and handle distributions. Additionally, TPAs facilitate investment options and provide access to … Read more

Withdrawing money from your 401k principal, which is the money you contributed pre-tax, can be a complex process with potential tax implications. To withdraw funds, you’ll need to contact your plan administrator and determine the withdrawal options available. Typically, you can only withdraw your principal if you are over 59.5 years old, or if you … Read more

A hardship withdrawal from your 401k lets you access funds before you reach the age of 59½ without the typical 10% penalty. However, it’s important to understand that hardship withdrawals are meant for true financial emergencies, such as medical expenses, college tuition, or a home down payment. There are strict IRS rules for what qualifies … Read more

RMD is the minimum amount of money that you must withdraw from your 401(k) account each year once you reach age 72. The purpose of RMD is to ensure that you are drawing down your retirement savings and paying taxes on them. The amount of your RMD is based on your age and the balance … Read more

403(b) plans and 401(k) plans are both employer-sponsored retirement savings plans that offer tax advantages. However, there are some key differences between the two plans. 403(b) plans are typically offered by public schools and other tax-exempt organizations, while 401(k) plans are offered by for-profit businesses. 403(b) plans have higher contribution limits than 401(k) plans, but … Read more

Rolling over a 401(k) into a SEP IRA is a strategy commonly used to consolidate retirement savings and potentially lower investment fees. A SEP IRA is a type of individual retirement account designed for self-employed individuals or business owners with employees, while a 401(k) is an employer-sponsored retirement plan. By rolling over funds from a … Read more

If you need money, you may wonder if you can borrow from your 401(k) plan. The answer is yes, but there are some important things to keep in mind. First, you’ll need to take out a loan from your plan, not a withdrawal. This means you’ll still owe the money back to your 401(k) plan, … Read more

401(k) withdrawals are subject to federal income tax, and in some cases, state income tax. Illinois is one of the states that taxes 401(k) withdrawals. The state’s income tax rate is 4.95%, and it applies to all income, including 401(k) withdrawals. However, there are some exceptions to this rule. For example, withdrawals made after the … Read more

Vested balance refers to the portion of your 401k retirement account that you have ownership and control over. It represents the funds you’ve contributed, as well as any earnings or employer matching contributions that have become non-forfeitable over time. As you work and contribute to your 401k, your vested balance typically increases according to the … Read more

A forfeiture is the loss of some or all of an employee’s account balance in a 401(k) plan. This can occur for a number of reasons, including: * **Premature withdrawal:** If an employee withdraws money from their 401(k) account before they reach age 59½, they may be subject to a 10% early withdrawal penalty. This … Read more