401K in 2018
401(k) plan is the tax-qualified, defined-contribution retirement account which is defined in subsection 401(k) of the IRS(Internal Revenue Code).
This retirement savings contributions are provided by an employer (and sometimes proportionately matched) and deducted from the employee's paycheck before taxation.
My company matches 100% of my contribution amount up to 5% of salary.
Maximum pre-tax annual contribution limit will be increased from $18,000 (as of 2017) to $18,500 in 20018.
It is tax-deferred until withdrawal after retirement or as otherwise permitted by applicable law.
Roth 401(k) deferral is similar to the provisions of a Roth IRA which contributions are made on after taxation.
Withrawals are restricted until the age of 59½. For any withdrawal before the age of 59½, the ordinary income tax PLUS 10% penalty of the amount distributed.
Account owners must begin making distributions from their accounts by April 1 of the calendar year after turning age 70½ or April 1 of the calendar year after retiring, whichever is later.
Required minimum distributions (RMD) is 5% of retirement plan. Required minimum distributions apply to both pretax and after-tax Roth contributions.
If an account owner fails to withdraw a RMD, the penalty is 50% of the amount should have been distributed, one of the most severe penalties of IRS.
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Thank you. Very good explanation on pension contributions.