Frequently Asked Questions about 401k’s
We know it can feel like diving into the financial deep end, so we’ve gathered the FAQ’s (most frequently asked questions about 401k’s) straight from our participants.
Let’s get those 401(k) mysteries unraveled!
Cracking the code of your company’s 401(k)
What Exactly is a 401(k)?
It’s a retirement savings plan sponsored by your employer, giving you a way to stash away money for your golden years while enjoying some sweet tax benefits.
401k contributions occur through salary deferral and are deducted straight from your paycheck automatically, but it’s always best practice to keep an eye on the deferrals to make sure they are correct!
How Much Can I Contribute?
The IRS sets the contribution limits, and they can change. That’s why you’ll always see in parenthesis “as indexed for 20XX” after contribution limits in articles. See example below:
Currently, you can contribute up to $23,000 per year. If you’re 50 or older, you get a catch-up contribution bonus of $7,500 (as indexed for 2024).
Does My Company Match Contributions?
Ah, the golden question!
Many companies offer a matching program – it’s like free money for your retirement. You can check with HR, your 401k advisor, or recordkeeper to know if your company is in the matching game and how it works.
With my plans, I always tell the plan sponsor (HR team, business owners, etc) to send all 401k questions straight to me as their consultant; consider reaching out to the person listed as “advisor” first!
When Can I Start Contributing?
The sooner, the better!
You typically become eligible once you’ve been with the company for a certain period. Check with HR, your 401k advisor, or recordkeeper to know when you can start your 401(k) journey.
Can I Change my Contribution Amount?
Absolutely! Life changes, and so can your contribution amount. You can adjust it when you need to, but keep in mind that it may take a payroll cycle or two before it takes effect.
Just chat with your HR squad to make those changes.
What Happens if I Leave the Company?
Your 401(k) stays with you!
You can:
- Leave it where it is*
- Roll it over into a new employer’s plan, or
- Transfer it to an individual retirement account (IRA).
*Some plans have threshold requirements–check with your 401k advisor on this when leaving the company.
What Investment Options Do I Have?
Your 401(k) has a menu of investment options. If you’re unsure where to start, HR can point you in the right direction or connect you with financial resources.
How Do Loans or Hardship Withdrawals Work?
Sometimes life throws curveballs. If you need money, you might be able to take a loan or a hardship withdrawal. However, these come with rules and consequences. Always consult your 401k advisor to fully understand the implications.
Can I Access my 401(k) Online?
Welcome to the digital age! Many recordkeepers offer online platforms where you can manage your 401(k). Your 401k advisor can guide you on how to log in, check your balance, and make changes with a few clicks.
How Does the 401(k) Fit Into my Overall Benefits Package?
Your benefits package is like a puzzle, and the 401(k) is a crucial piece. It complements other benefits like health insurance and paid time off, contributing to your overall financial wellness.
Not to worry though, your HR team can help you see the big picture!
Do you have other 401k questions?
Navigating the 401(k) maze can feel like a puzzle, but fear not! We are happy to answer your questions and ensure you’re making the most of your retirement savings journey.
Remember, there’s no such thing as a silly question when it comes to securing your financial future. Chat with your benefit heroes, and let the 401(k) adventure begin!
