What are the tax benefits of 401(k) plans?
An example of an AI chatbot conversation about tax benefits of 401(k) plans.
What are the tax benefits of 401(k) plans?
401(k) plans offer tax-deferred growth on your investments, meaning you won't pay taxes on your contributions or earnings until you withdraw them.
Are there any limits on how much I can contribute?
Yes, for 2023, the contribution limit is $22,500, or $30,000 if you're age 50 or older, allowing for catch-up contributions.
What happens if I withdraw money early?
If you withdraw money from your 401(k) before age 59½, you may face a 10% early withdrawal penalty, plus income tax on the amount.
Can I roll over my 401(k) to an IRA?
Yes, you can roll over your 401(k) to an IRA without incurring taxes, which can provide more investment options.
What are the tax implications when I retire?
When you retire and start withdrawing from your 401(k), those withdrawals are taxed as ordinary income, so plan accordingly.
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