Frequently Asked Questions
What is the maximum contribution limit for a 401(k)?
For 2023, the maximum contribution limit for employees under age 50 is $22,500. If you’re 50 or older, you can contribute an additional $7,500 as a catch-up contribution, bringing the total limit to $30,000.
Can I have both a Traditional and a Roth 401(k)?
Yes, many employers offer both options, and you can contribute to both types of accounts in the same year. However, your combined contributions to both accounts must not exceed the annual contribution limit.
What happens to my 401(k) if I change jobs?
If you change jobs, you have several options for your 401(k). You can leave the funds in your old employer’s plan (if allowed), roll them over into your new employer’s 401(k) plan, roll them into an individual retirement account (IRA), or cash out the account (though this may incur taxes and penalties).
When can I start withdrawing from my 401(k) without penalties?
You can start withdrawing from your 401(k) without incurring early withdrawal penalties at age 59½. If you withdraw funds before this age, you may face a 10% early withdrawal penalty in addition to regular income taxes on the withdrawn amount, unless you meet certain exceptions.
Do I have to start taking money out of my 401(k) at a certain age?
Yes, you are required to start taking required minimum distributions (RMDs) from your Traditional 401(k) starting at age 73 (for those who reach 72 after 2022). Roth 401(k)s are also subject to RMDs, but they can be rolled into a Roth IRA to avoid RMDs.
If I contribute to a 401(k), I can’t contribute to other retirement accounts.
You can contribute to both a 401(k) and an IRA in the same year, allowing you to maximize your retirement savings. However, income limits and other factors may affect tax deductions for IRA contributions.