Tax season is in full swing and the end is in sight, which means lots of organizing, lots of paperwork and lots of questions. It’s a good thing being organized, handling lots of paperwork and answering questions is what we do.
As with many things in our industry, clients tend to come to us with similar inquiries about their retirement plans and preparing for tax season. So, we put together a list of the top questions that we get from clients during tax season but are relevant all year long:
– What is the maximum contribution that I can make to my plan?
o The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increased from $18,000 to $18,500 for tax year 2018.
– Will I be taxed if I take an early withdrawal?
o The short answer, yes. And, the cost could be significant. Typically plan administrators are required to automatically withhold 20% of your withdrawal and pay it directly to the IRS to cover taxes you may need to pay on that withdrawal. Also, if you cash out before the age of 59 ½ you will have to pay a 10% early withdrawal penalty.
As always, should you have any questions regarding specifics to your plan, our team members would be happy to help.