When filing taxes, you can report your 401k contributions on Form 1040. These contributions reduce your taxable income, so you’ll pay less in taxes. To report them, find the “Adjusted gross income” line on your tax form and subtract the amount you contributed to your 401k from your total income. For traditional 401k plans, the … Read more
If you have access to both a Simplified Employee Pension (SEP) Individual Retirement Account (IRA) and a 401(k) plan through your employer, you may wonder whether you can contribute to both. The answer is yes, in most cases. However, there are some important rules to be aware of. First, you can only contribute to a … Read more
Consider your financial goals, risk tolerance, and tax situation when deciding whether to roll over your 401(k) to an IRA. If you plan to retire early or need access to your funds before age 59½, an IRA may provide more flexibility with lower fees and investment options. However, if you prefer professional management and a … Read more
If you’re behind on your 401(k) contributions, you can make catch-up contributions. These contributions let you put in extra money to your 401(k) each year, beyond the regular limits. The catch-up contribution limit is $6,500 in 2023 ($7,500 for those age 50 or older). To make catch-up contributions, you must be at least 50 years … Read more
Deciding whether to purchase an annuity with your 401k funds requires careful consideration. Annuities guarantee a steady income stream during retirement, providing peace of mind and ensuring a stable financial future. However, they also have potential drawbacks, such as limited investment options, higher fees, and potential penalties for early withdrawals. Evaluate your retirement goals, risk … Read more
Borrowing money from your 401k can be an option if you need to access funds in an emergency. However, it’s important to understand the potential consequences and weigh them against other options. 401k loans must be repaid within a specific timeframe, typically five years. If you leave your job while you still have an outstanding … Read more
If you contribute more than the annual limit to your 401(k) plan, the excess amount is subject to a 6% excise tax, and you may have to pay income tax on it. The excess contribution will also be included in your taxable income, which can increase your tax bill. To avoid these penalties, it is … Read more
For 2023, the maximum amount you can contribute to your 401(k) plan is $22,500. This limit applies to both employee and employer contributions. If you’re 50 or older, you can make catch-up contributions of up to $7,500, bringing your total contribution limit to $30,000. Keep in mind that these limits are set by the IRS … Read more
To convert a traditional 401(k) to a Roth 401(k), you typically need to initiate the process through your current 401(k) plan administrator. Complete the necessary paperwork and indicate the amount you want to convert. The plan administrator will then handle the conversion and notify you once it is complete. However, it’s important to note that … Read more
When taking money out of your 401(k) account, understanding the tax implications is crucial. In general, withdrawals before age 59 ½ are subject to income tax and a 10% early withdrawal penalty. However, there are exceptions to this rule. If you withdraw funds for certain qualifying events, such as medical expenses, higher education costs, or … Read more