401k plans are plans for your retirement; your 401k takes a certain amount of money from your paycheck and submits it to a bank account for later use. After you have reached a certain amount of money in your 401k you are eligible to make withdrawals, but these withdrawals are just like loans all the money you withdraw you must pay it back within 5 years of the withdrawal.
Also like any other loan it accumulates interest that must be paid but so not the smartest idea to make withdrawals from your 401k until you can do it freely and not have to pay it back. You can freely withdraw from your 401k at the age of 59 ½ , but if you leave your employer after the age of 55 and become disabled you are also liable to withdraw from your 401k freely. Also, by the age of 70 you will have to take out a certain amount of money from your 401k monthly.
There are also many other rules about your 401k that you’re going to need to know though. Like to start you cannot just make deposits into your 401k you have to have the money deducted through payroll and even though you can get as much deducted from your payroll as you want you can only deposit a maximum of $16,500 a year if you are under the age of 50. Also even though your 401k deposits are not federally taxed until you withdraw from your 401k, it is subject to certain taxation such as Social Security, Medicare, and federal unemployment taxes.
Now also if for some reason you leave your current employer you are able to get your 401k put into your new plan with your new employer it’s called a 401k Rollover. Usually when doing a 401k rollover you only have a certain amount of time to get it rolled over to your new employer’s 401k plan if fail to make the roll over into your new plan your 401k will be taxed and penalized for pretty much not following the rules of your 401k.
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