401(k)
You may be familiar with a 401(k) at your work place. A 401(k) is a retirement plan put in place by a business, where automated contributions can be made through your paycheck.
One benefit of participating in a 401(k) plan, is that many employers offer to match a portion of what you save, which equals free money and increased savings.
The maximum contribution into a 401(k)for 2020 is $19,500, and $26,000 if you are 50 years or older as an employee, as long as you earn at least that much.
Many 401(k) plans offer a Traditional and a Roth option, which means that your contributions can be tax deductible, OR you can take advantage of tax free withdrawals in retirement, OR BOTH. Another benefit is that the Roth 401(k) is not limited by how much income you earn, like the Roth IRA.
Taxes and penalties may apply to early withdrawals from 401(k)’s, so like IRA’s, you will want to make sure that you intend to leave your funds in the plan until you retire.
Like the solo 401(k), contributions follow a January 1-December 31st calendar year.
Vesting schedules may apply on employer contributions. This means that you may need to work at your place of employment for a certain amount of time, before the matching funds become yours. The money you contribute is always yours.
If you have questions about your 401(k) at work, for example: how much to contribute, how much your employer matches, or how to invest your contributions, please reach out to me! As well, if you have an old 401(k) from a past workplace, and you are wondering what your options are, I can help with that too, and finally, if you are a business owner who is interested in possibly providing a 401(k) plan for your employees, but have additional questions, I can answer those as well!
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