Talk:401(k)

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edit·history·watch·refresh Stock post message.svg To-do list for 401(k):


Here are some tasks awaiting attention:
  • Cleanup : Fix the withdrawal of funds section. Need to consider after tax contributions, pre-1972, 1986-whatever contributions, and the language on the penalty and exceptions needs to be consistent. It's a little contradictory from the first to second paragraphs.
  • Expand : Distribution discussion to cover RMD's for inherited plans, Briefly cover profit sharing provisions.
  • Verify : Add inline references
  • Other : Fiduciary responsibility; Break up the details and technical details sections into topical sections. Possibly (A)Contributions; (B)Administration (the plan document, testing, safe harbors, QNEC, etc); (C)Separate accounts, exclusive benefit; (D) Describe top-heavy 401(k) plans
Priority 4

A few comments[edit]

The article is rather hard to read and could be improved. A few comments are necessary.

1. The last paragraph in the "Withdrawal of funds" is ugly and needs to be re-written. Expressions like "Some will argue" and words like "you" and "your" should be avoided.

2. In the RMD section I read "Other than the exception for continuing to work after age 70½ differs from the rules for IRA minimum distributions. The same penalty applies to the failure to make the minimum distribution. The penalty is 50% of the amount that should have been distributed, one of the most severe penalties the IRS applies." First of all, the first sentence needs to be fixed. Secondly, no penalty is mentioned before "The same penalty applies".

3. "That is for plans whose first day of the plan year is in calendar year 2007, we look to each employee's prior year gross compensation (also known as 'Medicare wages') and those who earned more than $100,000 are HCEs. Most testing done now in 2009 will be for the 2008 plan year and compare employees' 2007 plan year gross compensation to the $100,000 threshold for 2007 to determine who is HCE and who is a NHCE." "we" should not be used. "now" is unnecessary.

4. "Note: an unincorporated business person is subject to slightly different calculation." Is it proper to start a sentence like this? I don't think so.

ICE77 (talk) 05:19, 23 July 2012 (UTC)

"...these contributions are made on an after-tax basis and all earnings."

All earnings... what?[edit]

Hanging sentence: "...these contributions are made on an after-tax basis and all earnings."

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Cheers.—cyberbot IITalk to my owner:Online 15:47, 27 February 2016 (UTC)

Capital Gains in 401k[edit]

Under the heading Taxation, I don't understand the statement "Earnings from investments in a 401(k) account in the form of capital gains are not subject to capital gains taxes."

That seems to be misleading. All profits in a 401k are subject to normal income taxes upon withdrawal, excepting possibly for a special provision called NUA for company stock inside a 401K.

I am thinking the original author is probably trying to say, compared to mutual funds which often have annual capital gains distributions with tax liability, 401K allows savings to accumulate tax-deferred until withdrawal.

So the first sentence should say: "Income taxes on pre-tax contributions and investment earnings in the form of interest and dividends add: and capital gains are tax deferred."

Upon withdrawal all 401K gains are taxed as normal income (short term gains tax treatment), excepting for a special provision called NUA which allows favorable tax treatment (lower long term gains tax rates) for certain company stock gains, subject to the NUA rules.


TBILLT (talk) 16:22, 10 July 2018 (UTC)TBILLT

I think it's accurate in that the gains themselves are not taxed while in the fund. Withdrawal is another issue, one that that sentence is not addressing. JesseRafe (talk) 17:13, 10 July 2018 (UTC)

Second sentence in Taxation section is false[edit]

This can be readily seen by simple calculation. — Preceding unsigned comment added by 159.118.108.99 (talk) 18:50, 3 November 2018 (UTC)