Deciding whether to roll over an old 401k into a Roth IRA requires careful consideration of your financial goals and tax situation. Moving to a Roth IRA offers tax-free withdrawals in retirement, but you’ll pay taxes now on the transferred amount. Evaluate your retirement income needs, current tax bracket, and potential future tax rates. If … Read more
Generally, you cannot withdraw money from your 401(k) without facing a 10% early withdrawal penalty if you are under the age of 59 1/2. However, certain exceptions exist. For instance, you can make penalty-free withdrawals for qualified expenses such as higher education costs, medical expenses, and a first-time home purchase. Additionally, if you turn 55 … Read more
Whether you can roll over your Roth IRA into a 401(k) depends on several factors, including the type of 401(k) plan your employer offers and the rules of the Roth IRA account. Typically, you can only roll over funds from a Roth IRA into a 401(k) if the 401(k) plan allows for after-tax contributions. Additionally, … Read more
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