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- A 401(k) plan is a retirement plan benefit provided by your employer.<\/li>\n\n\n\n
- 401(k) plan contributions are automatically deducted from your paycheck and transferred to your retirement account.<\/li>\n\n\n\n
- Participating in a 401(k) plan can help lower your taxable income.<\/li>\n\n\n\n
- Early withdrawals from your 401(k) could result in a 10% penalty; however, there are exceptions to this rule.<\/li>\n\n\n\n
- Keeping track of your savings progress is easy with your employee dashboard.<\/li>\n<\/ul>\n\n\n\n
Defining the 401(k) plan:<\/h2>\n\n\n\n
A 401(k) plan is a retirement savings plan provided by your employer. To participate in the plan, you can either sign up or allow your automatic enrollment.<\/a> You have control of the dollar amount or percentage that is taken from your paycheck and automatically transferred into it.<\/p>\n\n\n\n
With a traditional 401(k) option, your funds are automatically deducted from your pre-tax income. This means every dollar that you contribute to your 401(k) is not taxed until you withdraw it. In other words, a lower income tax payment for you! <\/p>\n\n\n\n
Let\u2019s get a little granular, shall we? If you were to invest 10% of each paycheck into your 401(k) account, those funds would automatically be deducted from your paycheck and transferred into your 401(k) account during the payroll process. Your remaining money would be your take-home pay. That 10% deduction in funds equates to less income for you to report during tax season, more importantly, you won\u2019t have to pay taxes on your retirement savings until you make a withdrawal.<\/p>\n\n\n\n
If you\u2019ve chosen a Roth 401(k) option, your contributions come from your net,<\/a> (post-tax<\/a>),<\/a> income. In this case, you do have to pay income taxes on every dollar you contribute, but hey, your qualified retirement withdrawals will be tax-free. Not too shabby!<\/p>\n\n\n\n
Benefits of 401(k) plan participation:<\/h2>\n\n\n\n
Aside from potential tax advantages, a 401(k) participant can enjoy other benefits such as: <\/p>\n\n\n\n
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- Conveniently saving for the future <\/strong>\u2014 Automatically contributing to a 401(k) account will allow you to sock away money with ease.<\/li>\n\n\n\n
- Employer matching options (if offered)<\/strong>\u2014 Employers can match up to 100% of your salary. Don\u2019t leave free money on the table!<\/li>\n\n\n\n
- High contribution rates<\/strong> \u2014 401(k) accounts permit a high contribution rate of $23,500 in 2025, allowing you to save more money at a faster pace compared to an IRA.<\/li>\n\n\n\n
- High catch-up contributions <\/strong>\u2014 After reaching the age of 50, participants can contribute up to an additional $7,500 annually.<\/li>\n\n\n\n
- Matured funds over time <\/strong>\u2014When do you hope to retire? The sooner you contribute to your 401(k), the more time your funds will have to mature for your future. Are you aware of the powerful effects of compound returns<\/a> over time?<\/li>\n\n\n\n
- Choosing a Roth or traditional 401(k) account<\/strong> \u2014 Do you prefer to lower your tax bill now or in the future? You can decide which type of account would work best for you.<\/li>\n<\/ul>\n\n\n\n
Early withdrawals from your 401(k) account:<\/h2>\n\n\n\n
While industry experts strongly recommend waiting until retirement to access your funds, there are instances where you\u2019re permitted to withdraw funds early. However, early withdrawals typically result in a 10% fee. <\/strong><\/p>\n\n\n\n
You might be thinking, \u201cbut what about in an emergency? I\u2019m going to need money right away.\u201d The government understands that sometimes emergencies happen that require access to your savings immediately. <\/p>\n\n\n\n
In that case, there are certain distribution types that won\u2019t require you to pay a 10% early withdrawal fee.<\/p>\n\n\n\n
These include:<\/p>\n\n\n\n
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- Emergency Personal Expense Distribution (EPED)\u2014 <\/strong>For your individual or family\u2019s unforeseeable or immediate financial needs.<\/li>\n\n\n\n
- Qualified Birth or Adoption Distribution (QBAD)\u2014 <\/strong>Intended forchildbirth or adoption expenses of a child (one withdrawal per child in the first year of childbirth or adoption).<\/li>\n\n\n\n
- Qualified Disaster Recovery Distribution (QDRD)\u2014<\/strong>A financial loss due to a federally declared disaster, such as losing your home in a wildfire. <\/li>\n\n\n\n
- Withdrawals for Domestic Abuse Victims\u2014<\/strong>Must be withdrawn within one year of the domestic abuse incident.<\/li>\n\n\n\n
- Distributions taken by a Terminally Ill Individual\u2014<\/strong> Your life expectancy must be 84 months or less.<\/li>\n<\/ul>\n\n\n\n
Tracking your 401(k) account performance:<\/h2>\n\n\n\n
![\"\"](\"\/marketing2025\/wp-content\/uploads\/sites\/23\/2025\/09\/ePlan-dashboard.png\")
<\/figure><\/figure>\n\n\n\nOnce your 401(k) account is up and running, take your retirement preparedness even further by keeping an eye on its progress. Sign in to your employee dashboard to view a snapshot of your account balance and even make changes to your contribution rate. You can set your contribution rate as a dollar amount or a percentage.<\/p>\n\n\n\n
- Qualified Birth or Adoption Distribution (QBAD)\u2014 <\/strong>Intended forchildbirth or adoption expenses of a child (one withdrawal per child in the first year of childbirth or adoption).<\/li>\n\n\n\n
- Employer matching options (if offered)<\/strong>\u2014 Employers can match up to 100% of your salary. Don\u2019t leave free money on the table!<\/li>\n\n\n\n
- Conveniently saving for the future <\/strong>\u2014 Automatically contributing to a 401(k) account will allow you to sock away money with ease.<\/li>\n\n\n\n
![\"\"](\"\/marketing2025\/wp-content\/uploads\/sites\/23\/2025\/09\/ROC.png\")
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