These Are Some Great Ways to Use Your Arizona 401k

  • The 401k is a retirement plan that allows you to save money for your retirement years.
  • Employers may match your contributions, or they may contribute a certain amount to your 401k account.
  • Your 401k plan limits the amount you can invest each year.

If you are participating in the 401k program offered by your employer, then you are already one of the lucky few who are saving for the future. However, most people do not know just how much money they can save each year by simply making a few changes in their spending habits.

How do I set up or contribute to an Arizona 401k?

You can open an IRA (individual retirement account) at a bank or brokerage, or through a mutual fund company. A 401(k) is one kind of employer-sponsored retirement plan.
Contributions to an employer-sponsored retirement plan are tax-advantaged, meaning that you pay taxes on the contributions you make now, but you don't pay taxes on the earnings that are withdrawn in the future.

How can I withdraw money from my Arizona 401k?

You can withdraw funds from your Arizona 401(k) before the age of 59.5. However, you'll be charged a 10% penalty and income taxes will be due on the distribution.
For example, let's say you contributed $2,500 to your Arizona 401(k) account and you were 47 years old. If you withdrew your $2,500 before the age of 59.5, you'd have to pay a 10% withdrawal penalty, which would reduce your $2,500 withdrawal to $2,250, plus income taxes on any earnings.
If you withdraw funds after age 59.5, you won't be charged any penalty. However, you'll be required to begin taking withdrawals from your Arizona 401(k), unless you turn 70.5 before April 1, 2033.

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How do I obtain an Arizona 401k loan?

You can borrow up to $50,000 from your 401k provided you have at least 10 years of service.
How do I withdraw money from my Arizona 401k account?
There are two ways for you to withdraw money from your 401k account:
1) A hardship withdrawal (also known as a "hardship distribution") taken for expenses because of an unforeseeable emergency

2) A distribution taken for payment of eligible medical expenses not reimbursed by insurance

If you want to withdraw money in order to purchase your first home, you should consult your tax advisor first.

How much can I contribute to an Arizona 401k?

You can contribute as much as $18,000 annually, or up to $24,000 if you are over 50.
What types of investments can I include?
You can only invest in traditional mutual funds.
Can I borrow from my 401k?
No, you cannot borrow from your 401k in Arizona.
Can I take my 401k with me if I leave my job?
Yes, you can take your 401k with you, but cannot roll it over into another 401k plan.

Only those with a 401k need to read this

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How do I invest in an Arizona 401k?

Your Arizona 401k should be your flexible, portable retirement savings account. You can choose to invest your money in individual stocks, bonds, mutual funds, ETFs, or certificates of deposit, as well as real estate.
What are the contribution limits for an Arizona 401k?
The 2019 contribution limits for an Arizona 401k are $19,000 for those under 50 and $25,000 for those over 50.
Am I eligible for a match from my Arizona 401k?
Depending on your employer, you may be eligible for an employer match on your 401k. In this case, the employer may provide a contribution up to a certain percentage of your salary. For example, an employer may offer a 3% match on up to 6% of your salary, 4% on up to 8%, and so on.

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What plan types are offered in Arizona?

Arizona 401k plans come in two varieties: a traditional 401k plan, which is similar to a 401(k) plan offered by most employers, and a profit-sharing 401k plan. Under a traditional 401k plan, employees contribute a portion of their salary, based on a predetermined amount set by the IRS, with the balance contributed by the employer. With a profit-sharing 401k, however, the employer contributes a sum equal to a certain percentage of employee salary, and the employee contributes the remainder.

What are the fees associated with an Arizona 401k?

The fees charged by Arizona 401k providers are similar to those charged by most 401k providers. These fees cover the administrative costs of managing your retirement plan. Fees typically range from 0.2% to 1% annually.

Keep in mind, however, that your 401k provider may have additional costs associated with your investment options, such as mutual fund fees. These fees are typically deducted from your account balance.

What types of investment options are offered in an Arizona 401k?

Arizona 401k plans offer a wide variety of investment options, including mutual funds, stocks, bonds, CDs, and money market accounts.
In some cases, employers may even offer self-directed 401k accounts, in which employees can invest in real estate, precious metals, and other alternative assets.

Can I change investment options in my Arizona 401k?

Yes, you can. You're allowed to switch between target-date funds, invest in mutual funds, or select individual stocks. Most 401(k) plans allow you to transfer money between classes, which is often referred to as a transfer-in or transfer-out.
Can I borrow from my Arizona 401k?
Although borrowing from 401(k) plans is less common than borrowing from a traditional retirement account, it isn't unheard of. Generally, this is considered a loan, and you're required to pay it back. If you have an outstanding Arizona 401(k) loan, you'll have to make payments, and if you don't, you'll be hit with an early withdrawal penalty.

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Why buy an Arizona 401k?

Arizona 401k accounts are funded with pre-tax dollars, which means your money grows tax-deferred until you begin withdrawals.
Arizona 401k plans are also portable. You can roll your Arizona 401k into an IRA when you leave your job, and 401k owners can move their IRA investments into a 401k account.

Here are some things to keep in mind:

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The Bottom Line

The Arizona 401k plan is a flexible plan, which means you and your company have a lot of leeway to determine your asset allocation, investment options, and contribution levels. As with all plans, make sure you understand the rules for your employer's plan.