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Employee 401(k) Questions

Common employee 401(k) questions and how to answer them.
By Carolin Hewitt, Updated Nov 10, 2023
AN HR officer is answering an employee's 401(k) questions.

One of the most popular ways to plan for the future is through a 401(k) plan — a company-sponsored retirement account to which employees contribute a percentage of their income. To give you a brief overview of 401(k) plans and help you answer employees' questions, we've listed different plan types and answered the most common questions in our FAQs.

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Types of 401(k) Plans:

  • Traditional 401(k): Employees make contributions and taxes are deferred.
  • Safe Harbor 401(k): Employers make the same percentage of contributions to every employee's 401(k) and do not need to pass an annual nondiscrimination test.
  • SIMPLE 401(k): Designed for small businesses with 100 or fewer employees.
  • Solo 401(k): A single-participant 401(k) plan for business owners with no employees.
  • Roth 401(k): Similar to a traditional 401(k), except taxes are withheld from the employee's gross pay before wages are diverted to their 401(k).

What to Consider Before Offering a 401(k) Plan:

If your business decides to offer 401(k) contributions to its employees, you should make sure that you are well-versed in the rules of 401(k) investing. Because 401(k)s are administered by employers, you will be the first person new employees turn to when they start thinking about putting away money for their retirement.

FAQs:

How much should I contribute to my 401(k) per pay period?

If you are above the minimum age of 21 and under 50 years old, you can contribute up to $19,000. If you're 50 or older, you can make additional contributions of up to $6,000, for a total of $25,000.

How much should I put in my 401(k) per paycheck?

When saving for retirement, it is best to get the most out of every spare dollar. There are limits to what you can contribute to your 401(k), but putting away 10% of your paycheck is advisable.

How many hours do you have to work to qualify for 401(k)?

A thousand hours is the maximum you can be asked to work before qualifying for the company's 401(k).

Is there a minimum age for 401(k)?

Employers are only required by law to include on their 401(k) plan employees who are over the age of 21 years.

What is a 401(k)?

A 401(k) is a retirement savings plan that is authorized by the IRS. Employers can deduct whatever 401(k) contribution amount that you request from your paycheck when they do payroll.

Will you match my 401(k) contributions?

Employers often offer a portion of the employee's contribution to 401(k). The company's policy regarding contributions determines how big a portion that will be.

When can I access my money again?

The purpose of a 401(k) is to help you invest money during your working years so that you will have savings for retirement. You can begin to make withdrawals from your 401(k) once you are at least 59 and one-half years of age. If you make a withdrawal before then, there is a penalty tax of 10%.

What if I start a new job somewhere else?

Your best option is to roll your old 401(k) over to your new employer. You can continue contributing to the same 401(k) through your new employer.

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