Common misconceptions about 401(K) Plans - Part Two
This is the second part of a featured article from a recent Beyond the Number$ newsletter from Bowers Private Wealth Management. The article places its focus upon six common misconceptions regarding 401(K) Plans. If you'd like to read the first part of this article, please click here.
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(4) I contribute to my 401(K) plan at work, so I can't contribute to an IRA.
- Your contributions to a 401(K) plan have no effect on your ability to contribute to a traditional or Roth IRA.
- However, your participation (or your spouse) in a 401(K) plan may impact your ability to deduct contributions to a traditional IRA
(5) I have two jobs, both with 401(K)'s, which means that I can defer up to $18,000 to each plan.
- In 2015, you can only defer $18,000 total, plus catch-up contributions if you're eligible.
- This rule applies to all of your employer plans except for 457(b) plans where you might be able to defer up to $36,000 plus catch-up.
(6) I'm moving to a state with no income tax. I've heard that my former state can still tax my 401(K) benefits when I retire.
- This was indeed true many years ago, but is now no longer the case.
- Only the state in which you reside (or are domiciled) can tax those benefits.
If this article raises any concerns, or if you have questions about your own individual financial planning situation, please contact me and I'll be glad to help you. As I've mentioned before, financial planning can be very complex and must pay particular attention to detail, so don't go about this alone when you can have help from a CFP®.