The SECURE Act eliminated the stretch inherited 401(k) for most non-spouse beneficiaries, replacing it with a hard deadline: the entire balance must be distributed within 10 years of the original owner's death.
Most employer 401(k) plans allow mid-year changes to the deferral election percentage. Before the bonus pay period, raise the deferral rate high enough to funnel as much of the bonus as possible into the 401(k), up to the annual limit.
"I'm surprised by how neutral the rule was, when you think about the massive amount of lobbying there's been around it. It doesn't say certain assets are good or bad. Instead, it really focuses on making a rules-based framework instead of a litigation-based one."
When I was 22, my grandmother died. She was my favorite person. She didn't have a lot of money, but each of us grandchildren got a check for $3,000 from the will. I really, really wanted to do something special with that money, something to honor my grandmother, but I was young and dumb and broke, and it evaporated into rent and burritos and drinks and cigarettes and all the other "necessities" of my young, dumb 22-year-old life. I have had an "IOU" to myself for that money ever since and promised myself that one day, when I had an "extra" $3,000, that would be "grandma's money," and I'd do something special with it.
By the time Dr. Jill Green finished medical school, she'd racked up seven figures in student debt and had virtually zero assets. "My net worth was negative $1 million," the family practice and emergency medicine doctor told Business Insider. "Our primary home was our only asset." Green, who began her career in investment banking before pivoting to medicine, began entertaining the idea of property investing after hearing a physician couple speak at a virtual entrepreneur event for doctors.
Homebuying > retiring? Currently, 401(k) participants must pay an additional 10% tax on funds withdrawn from their account before the age of 59-and-a-half-also known as an early distribution-for any number of reasons, including buying a home. Rules are different under Individual Retirement Accounts (IRAs), which allow qualified first-time homebuyers to withdraw up to $10,000 without incurring the 10% penalty.
Saving for retirement in a traditional IRA or 401(k) can make more sense than socking money away in a Roth account. That's because traditional retirement accounts give you a tax break on your contributions. If you're a higher earner in a higher tax bracket, that tax break may be very valuable to you. Plus, you might earn too much money to contribute to a Roth IRA directly, making a traditional IRA a better bet.
This workplace account allows you to make pre-tax contributions to a retirement plan and, in many cases, your contributions also entitle you to receive matching funds from your employer. However, while most people know they should contribute to a 401(k), they aren't necessarily certain about what to do next. If you have a maxed-out account at work and you're trying to figure out what else to do with your money, here are some options to consider.
Higher-income workers who earn more than $145,000 must now put their catch-up contributions into a Roth 401(k), meaning that they'll pay taxes now rather than later in retirement. The rules generally apply to contributions beginning in 2027, but some plans can implement them earlier. The $145,000 income threshold is based on prior-year wages and applies separately at each employer. New hires and self-employed workers without W-2 wages are exempt.
