401(k)

 

What is a 401(k)?

A 401(k) plan is an employer-sponsored retirement plan that allows employee salary deferrals and employer match contributions. Traditional and Roth options are available, and mandatory withdrawals (RMDs) must be made at age 72, unless the employee is still working for the company past age 72. 401(k)’s generally allow the largest employee and employer contributions but have higher start-up and operating costs.

 

TL;DR –A 401(k) is an employer-sponsored plan that allows employee contributions and employer match and generally has higher contributions limits and higher operating costs.

 

Eligibility

  • Depends on each plan but could be 12 months of service and at least 21 years of age

Contribution Limits

Employees:

  • $19,500 per year if under age 50

  • $26,000 if age 50 or over

Employers:

  • Lesser of $58,000 or 100% of compensation for employees under 50

  • $64,500 for employees age 50 or over

Withdrawals

  • Traditional 401(k): Same rules as Traditional IRA

  • Roth 401(k): Same rules as Roth IRA

Taxes

  • Traditional 401(k): Same rules as Traditional IRA

  • Roth 401(k): Same rules as Roth IRA

 
Edward Oh