401(k) information and comparisons
| User Rating: | |
| Plan set by: | Employer |
| Contribution Limits: | Employee contribution limit of $23,000 (under 50 yrs old), $31K (50+); limits apply to combined total contributed to 401k and Roth 401k. Employee and employer combined contributions must be lesser of 100% of employee's salary or $70,000. |
| Income Limits: | Generally none, but some restrictions apply to HCE (highly compensated employees) within an organization. |
| Employer contributions: | Often |
| Investments in the account: | Stocks, Bonds, Mutual Funds. Capital gains, dividends, and interest within account incur no tax liability. |
| Tax Implications: | Money is deposited as tax-deferred and grows tax-free in the account. Gains in the account are not taxed. Distributions from the account are considered ordinary income and taxed accordingly. (some exceptions for after-tax contributions where allowed) |
| Distributions: | Distributions can begin at age 59 1/2 or earlier if owner becomes disabled. |
| Forced Distributions: | Must start withdrawing funds at age 70 1/2 unless employee is still employed. Penalty is 50% of minimum distribution |
| Borrowing against Account: | Depending upon the plan, borrowing against funds in the account is allowed up to 50% of the account value but only if still employed with the same employer. |
| Early Withdrawal: | 10% penalty plus taxes. Early withdrawal restricted to employee contributions; employer contributions cannot be withdrawn early. Exceptions for financial hardships, but 10% penalty applies even in those cases. |
| Early Withdrawal for Medical Expenses: | Medical expenses not covered by insurance for employee, spouse, or dependents subject to 10% penalty |
| Early Withdrawal for Homebuyers: | Purchase of primary residence and avoidance of foreclosure or eviction of primary residence is subject to 10% penalty |
| Early Withdrawal for Educational Expenses: | Payment of secondary educational expenses in last 12 months for employee, spouse, or dependents subject to 10% penalty |
| Conversions: | Upon termination of employment, can be rolled to IRA or Roth IRA. When rolled to a Roth IRA taxes need to be paid during the year of the conversion |
| Withdrawals: | Taxed as ordinary income |
| Changing Institutions: | Can roll over to another employer's 401(k) plan or to an (traditional) IRA at an independent institution |