4 Little-Known 401(k) Rules That Could Save You Thousands

Core Insights - The article discusses lesser-known rules regarding 401(k) plans that can significantly impact retirement savings and financial planning Group 1: Withdrawal Rules - The Rule of 55 allows individuals aged 55 or older to withdraw from their 401(k) without a 10% penalty if they separate from service [2] - State public safety employees can access this rule as early as age 50 [2] Group 2: Contribution Limits - In 2026, the contribution limit for 401(k) plans will be $24,500, with an additional catch-up contribution of $8,000 for those over 50, totaling $32,500 [3] - For individuals aged 60 to 63, the catch-up contribution limit increases to $11,250, allowing for a total contribution limit of $35,750 [3] Group 3: Tax Benefits - Contributing the maximum amount to a 401(k) reduces taxable income, thereby lowering the overall tax burden [4] Group 4: Roth Conversions - Converting 401(k) assets to a Roth IRA allows for tax-free growth and tax-free withdrawals, beneficial during years of lower income [5] Group 5: Loans Against 401(k) - Some 401(k) plans permit loans against the account, which must be repaid with interest; this option is recommended for emergencies [6] - If employment ends before the loan is repaid, the outstanding balance is taxed as a withdrawal [6]