10 401k facts everyone should know

Everyone should know the basics about how their 401k works. But you probably won’t pick up all the important facts in a one-hour 401k seminar. Here are the most important pieces of information you should know about your 401k.

How much you can contribute

When to contributeSome 401k plans allow you to sign up as soon as you start a new job, while others impose a waiting period of a few months or even a year before you can begin to contribute. Deposits to the account are typically made with money withheld from your paycheck.

Traditional 401k accounts allow you to defer paying income tax on the funds you contribute until you withdraw the money. To find out how much you will save, multiply your contribution amount by your tax rate. You may also get a tax break at the state level. Low-income savers may additionally qualify for the saver’s tax credit.

Many employers will match part or all of the amount you contribute to a 401k. Match formulas vary considerably by employer, but the most common 401k match is 50 cents for each dollar saved up to 6 percent of pay. Getting a 401k match is the quickest way to build up a large 401k balance.

While you always get to keep your contributions to the 401k, you don’t get to keep your 401k match or other employer contributions until you are vested in the plan. While some employers offer immediate vesting of employer contributions, other companies don’t let you keep the entire 401k match until you have been with the company for as long as five or six year

401?  That's our perpetually clogged, congested, and under construction highway here in the Great White North. ::LOL::

If you leave your job at age 55 or later, you can take 401k withdrawals from your most recent 401k without incurring the 10 percent early withdrawal penalty. However, if you leave a job with a 401k before age 55 or roll the money over to an individual retirement account, you’ll have to wait until age 59½ to avoid the penalty.

that was my smile for the day snoops 8)

[quote author=The Chairman link=topic=91233.msg575434#msg575434 date=1405535860]
that was my smile for the day snoops 8)
[/quote]

Okay Krish. 8)