There are limits on the amount that you can contribute. Employees can contribute up to $19,500 a year. People aged 50 or older can add another $6,500 to top up their funds. Employers can match those contributions until the total payments reach $58,000, or $64,500 including top-up funds.
Any withdrawals made from a 401(k) plan before the age of 59.5 will incur a penalty of 10 percent in addition to income tax. Like most retirement plans, pulling funds early from a 401(k) plan is expensive and best avoided.
But 401(k) plans can also have vesting conditions during retirement. Employees may only be able to access their employer contributions after they’ve worked at a company for a pre-defined period of time. In effect, a 401(k)’s vesting plan helps to keep an employee at a business or risk losing some of their expected retirement payments.
- What Is a 401(k)?
- How a 401k Plan Works
- 401k Contribution Limits
- The Difference Between a 401(k) and a Pension
- The Benefits of a 401k
- Four Alternative 401(k) Plans
- How Employers Should Choose a 401(k)
- What Is an Indexed Annuity?
- 5 Questions Employees Should Ask Before Choosing a 401(k)
- Contributing to Your 401(k) Plan
- Contribution Limits
- Matching Contributions
- Your Age
- How to Set Your 401(k) Contribution Targets
- Calculating Your Social Security Benefits
- What’s In Your 401k Plan?
- Track Your 401(k)
- The Present and Future Value of Your 401(k) and Why You Need to Know Them
- Rolling Over Your 401(k)
- You Don’t Have to Rollover Today
- Moving Your 401(k) to Your New Employer With a Direct Rollover
- Moving Your 401(k) to Your New Employer With a 60-Day Rollover
- Borrowing Funds from Your 401(k)
- Lend Yourself Interest-Free 401(k) Funds
- Borrowing from Your 401(k) to Buy a Home