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Cashing out your 401(k) plan before age 59 ½ means the withdrawal will typically be subject to a 10 percent IRS penalty, on top of the income tax owed on the distribution. ... and the sponsor of ...
When it comes to building a retirement nest egg, many people turn to their employers' 401(k) plans for the convenience and benefits involved. A person at a laptop. Image source: Getty Images.
A 401(k) is an employer-sponsored retirement plan that allows workers to put money aside on a special tax-advantaged basis, helping them save for their golden years more quickly.
In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. [1] Periodic employee contributions come directly out of their paychecks, and may be matched by the employer .
From time to time an employer will have to make structural changes to their 401(k) plan. When that happens, they might need to freeze changes to the plan overall. This is called a "blackout period ...
Maxing out your 401(k) might be especially problematic if your employer only offers a pre-tax 401(k) and not an after-tax Roth 401(k). Pre-tax 401(k) plans are great if your tax rate will be lower ...
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