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Frequently Asked Questions

Much of the information contained herein is provided by the following source:
"Building Your Nest Egg with Your 401(k)"
(American Press Inc., Washington Depot, Conn.)




What is a 401(k)?

How did 401(k)s get their name?

How is a 401(k) different from a regular pension?

How is a 401(k) different from a profit-sharing plan?

How long do I have to wait after being hired to join the 401(k) plan?

What happens to the money I put into the 401(k) plan?

What information about my 401(k) plan am I legally entitled to have?

What recourse do I have if my employer and I disagree about my 401(k) account?

How do I know how well my 401(k) investments are doing?

Do employers guarantee 401(k) accounts?

Does the government guarantee my 401(k) account?

What happens to my 401(k) account when I retire?

What happens to my 401(k) account when I die?

What happens to my 401(k) account if I'm disabled?

Does participating in a 401(k) affect any of my other benefits?

Why are the dividends on the employee stock portion of my 401(k) plan paid out to me instead of being reinvested?

How can having a 401(k) help my child qualify for financial aid?

If I'm saving money that I plan to use before I retire, does it make sense to do it with after-tax 401(k) contributions?

Are the assets in my 401(k) plan exempt from creditors in a bankruptcy?

Can I invest in both my company's 401(k) plan and an Individual Retirement Account?

If I decide not to participate in my 401(k) plan, will I be eligible for a fully deductible IRA?

If I have to choose between a 401(k) and IRA, which choice makes more sense?

An IRA seems safer than a 401(k) plan. Can I switch my money from my 401(k) into an IRA?

When I change jobs, how do I decide whether to leave my money in the company plan or switch it to an IRA?

Is there a dollar limit on how much 401(k) money I can transfer to an IRA?

If I roll my 401(k) money into a rollover IRA, what are the distribution requirements?

Why is it important to transfer money directly from a 401(k) account to a rollover IRA?

Can't I just have a check made out to me for the amount of my 401(k), and then deposit it in a rollover IRA within 60 days?

What will happen to the money I have in my 401(k) retirement plan when I leave my current employer?

If I change jobs, can I leave my money invested in my current employer's 401(k) plan until I retire?

If I change jobs, but I decide to leave my 401(k) account at my former company, can I keep putting money into it?

Can I roll a 401(k) account from my previous job into the plan I have now?

What happens to my 401(k) account if I'm fired?

What happens to my 401(k) if my employer is acquired by another company?

What happens to my 401(k) if my employer goes out of business?

How are the maximum contribution limits changing for 401(k) and 403(b) plans?

How do I contribute to a 401(k) plan?

Are my 401(k) contributions deducted as a percentage of all the pay I receive, including bonuses and overtime?

What's the minimum I can put in my 401(k)?

What is the limit on investing in a 401(k) every year?

I've heard that if I earn over a certain amount, my 401(k) contributions are capped. Is that true, and if so, why?

What is the difference between 401(k) and non-401(k) contributions to my account?

How do my 401(k) contributions lower my income taxes?

After I've made the maximum pre-tax contribution allowed, can I put additional money into the 401(k) plan if I want to?

What are the differences between a pre-tax and an after-tax 401(k) contribution?

Should I make both the maximum allowable pre-tax and after-tax contributions to my 401(k) every year?

Do I have to pay Social Security taxes on the money I contribute to the 401(k) plan?

Do I pay any taxes at all on the pre-tax contributions I make to my 401(k) plan?

Does the law allow me to deduct contributions I make to my 401(k) retirement plan?

What is a matching contribution to a 401(k)?

What is a profit-sharing contribution to a 401(k)?

Why do employers contribute to 401(k) plans if they don't have to?

Do my employer's contributions go into the 401(k) plan at the same time as mine?

Can my employer contribute company stock to my 401(k) plan using a an ESOP?

My spouse and I are both eligible to participate in 401(k) plans at work. We can't afford to put the maximum contribution into both plans. How do we decide how much to put into each plan?

Can I stop contributing to my 401(k) account if my budget is tight and I can't afford to save the money?

Can I take my money out of my 401(k) plan if I stop contributing to it?

Who picks the investment manager for my company's 401(k) plan?

Who picks the 401(k) plan investments?

How many investment options must be offered in a 401(k) plan?

How often can I switch money among investments in my 401(k)?

Do I get to decide how to invest all the money in my 401(k) account?

What can I do if I don't like my 401(k) plan's investment options?

What are the advantages and disadvantages of owning company stock in my 401(k) account?

Why doesn't my 401(k) plan allow me to transfer money from a GIC fund to a money market fund?

Can I borrow money from my 401(k) before retiring?

Must my spouse agree to a loan from my 401(k) plan?

Is it better to borrow from my 401(k) account rather than make early withdrawals?

Is there any drawback to taking a loan from my 401(k) account that I should be aware of?

How much of my total 401(k) account can I borrow?

What will a loan from my 401(k) plan cost me?

How soon do I have to repay a loan from my 401(k)?

If my money is divided among several different funds within the 401(k) plan, which one should I borrow from?

Is the interest I pay on a 401(k) loan tax-deductible if I use the money to buy a house?

Can I use my 401(k) account as collateral for a bank loan?

How do I qualify for a hardship withdrawal from my 401(k)?

Is there a limit on how much I can take in a hardship withdrawal from my 401(k)?

Are my employer’s contributions to a 401(k) available to me if I make a hardship withdrawal, or can I only take out my own contributions?

What taxes will I owe on a hardship withdrawal from my 401(k)?

What is meant by a premature distribution from a retirement plan?

If I withdraw funds from my 401(k) early, will I have to pay a penalty tax?

Why do I have to pay an early-withdrawal penalty for withdrawing my own 401(k) money?

How is the 10% penalty on early withdrawals from a 401(k) calculated?

How can I withdraw money from my 401(k) early without penalty?

How does the "same desk" rule affect retirement plan distributions?

What happens to my 401(k) account when I retire?

How long after I retire will it take me to get my 401(k) money?

What happens if I don’t start taking money out of my retirement account at age 70 1/2?

How can ten-year forward averaging mitigate my tax liability on a lump-sum withdrawal from a retirement plan?

When did five-year forward averaging cease to be available?

Can I take a lump-sum distribution from my 401(k) plan and use five-year averaging, even though I am only 57?

I am retired and when I got my 401(k) money, the amount was based on the value of my account as of two months earlier. Why didn’t I receive any interest for those last two months?

Can I take my money out of my 401(k) plan if I stop contributing to it?

Can I empty my 401(k) account without my spouse knowing about it?

Can my spouse empty my 401(k) account without my knowledge?

Must my spouse agree to a loan from my 401(k) plan?

If I get divorced, is my spouse entitled to a share of my 401(k) account?

What is a Qualified Domestic Relations Order (QDRO)?

How can I transfer part of my retirement plan assets to my former spouse without paying taxes on the withdrawal?

What’s the new retirement savings credit? Can I get money back for contributing to a retirement plan?

Does the new tax law change how much I can contribute to my IRA?

What tax form will I receive if I receive pension plan, annuity or insurance distributions?

At what point do I own my employer’s contributions to my 401(k) account?

How are my years of service determined in regard to vesting in a 401(k) plan?

The company I work for has four different business units. The subsidiary that I work for does not offer a 401(k) plan, but I am transferring to another unit that does. How will my years of service be determined for vesting purposes?



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