401k Retirement Plan Explained, Deep Dive by Katie St Ores
#401k #RetirementPlanning #FinancialLiteracy #katie_st_ores
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Welcome to The Deep Dive with me, Katie St Ores, CFP®, ChFC®, EA! In today's episode, we are taking a truly comprehensive look at one of the most powerful retirement savings tools available to many Americans: the 401(k) plan. Understanding the ins and outs of your 401(k) is absolutely crucial for building a secure financial future, and my goal is to empower you with the knowledge to make the most of it.
What Exactly IS a 401(k) Plan?
Definition: An employer-sponsored, tax-advantaged retirement savings plan.
Purpose: Helping you save and invest for your post-working years.
Who offers them and general eligibility.
Types of 401(k)s – Traditional vs. Roth:
Traditional 401(k): Pre-tax contributions, tax-deferred growth, taxes paid upon withdrawal in retirement. We'll discuss who might benefit most.
Roth 401(k): Post-tax contributions, tax-free growth, and tax-free withdrawals in retirement (if certain conditions are met). We'll explore the advantages and for whom this might be a better fit.
Key differences and how to decide, or if you can utilize both.
Contribution Rules & Limits (Focus on [Current Year - e.g., 2025] Guidelines):
Employee contribution limits: Understanding the maximum you can contribute annually (we'll reference the IRS limits for the current year, e.g., 2025).
Catch-up contributions: For those age 50 and over – an extra opportunity to boost savings.
Total contribution limits (employee + employer).
The Magic of Employer Contributions:
Employer Match: Free money! We'll break down common matching formulas (e.g., 100% of the first 3%, 50% of the next 2%) and why capturing the full match is critical.
Profit Sharing: Another way employers can contribute, even if you don't.
Vesting Schedules: Crucial to understand! When does that employer money truly become yours? We'll cover "cliff" vesting vs. "graded" vesting.
Navigating Your Investment Options:
Common investment choices: Mutual funds (stock, bond, balanced), target-date funds (TDFs), index funds, ETFs, and sometimes company stock.
Understanding risk tolerance and asset allocation basics within your 401(k).
The importance of reviewing and rebalancing your investments
Withdrawals, Loans, and Hardship Distributions:
Normal distribution rules (age 59 ½).
Early withdrawal penalties (the 10% additional tax) and exceptions.
401(k) Loans: How they work, potential pros (lower interest rates) and significant cons (repayment terms, leaving employer, potential double taxation, opportunity cost).
Hardship Withdrawals: Specific IRS criteria, taxes, and penalties still apply; generally a last resort.
Common mistakes to avoid (not starting early, not getting the match, choosing overly conservative/aggressive investments without understanding, ignoring fees).
Disclaimer:
The content in this video is for educational and informational purposes only, current as of the recording date (May 2025), and should not be construed as financial, investment, legal, or tax advice. Contribution limits and regulations can change; always consult official IRS publications or a qualified professional for the most current information. Investing involves risk, including the potential loss of principal. You should consult with a qualified professional (like a CFP® professional) before making any financial decisions. Katie St Ores and "The Deep Dive" are not responsible for any actions taken based on the information provided. All views expressed are personal opinions.
Other Retirement 401k videos:
Ultimate 401(k) Masterclass: Contributions, Investing & Withdrawals | Deep Dive
Unlock Your 401(k) Potential: An In-Depth Guide with Katie St Ores | The Deep Dive
401(k) Deep Dive: Everything You NEED to Know for Retirement Security | Katie St Ores
Beyond the Basics: A Deep Dive into Your 401(k) Strategy | The Deep Dive Podcast
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