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Level 1

401K Match

The company I work for was providing a 5% match. I invest well over the 55 match but they have recently canceled the match like a lot of companies. I have reduced it to 5% even without match to boost my savings and build up money in my brokerage account while the match is canceled. My questions are will this impact my tax refund at the end of the year and also asking if investing in strong stocks like Apple, Amazon and others like United Health that out perform my 401k would be a better idea? Should I even contribute to my 401k during this time?

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Accepted Solutions
Level 15

401K Match

Your company match has no bearing on your tax return.   Your own contributions are reported in box 12 on your W-2 and are not included in the W-2 box 1 taxable income.     The more that you contribute the lower taxable box 1 income that you will have.   That is the only tax difference.

 

Whether your overall financial situation would be better by investing in an self directed IRA that can purchase securities of your choice is something to discuss with a financial advisor.   There are advantages or disadvantages to both.

 

Depending on the terms of your 401(k) plan it might be possible to roll the 401(k) balance to a Traditional IRA at a financial institution, but not all plans allow that prior to retirement age.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

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3 Replies
Level 15

401K Match

Your company match has no bearing on your tax return.   Your own contributions are reported in box 12 on your W-2 and are not included in the W-2 box 1 taxable income.     The more that you contribute the lower taxable box 1 income that you will have.   That is the only tax difference.

 

Whether your overall financial situation would be better by investing in an self directed IRA that can purchase securities of your choice is something to discuss with a financial advisor.   There are advantages or disadvantages to both.

 

Depending on the terms of your 401(k) plan it might be possible to roll the 401(k) balance to a Traditional IRA at a financial institution, but not all plans allow that prior to retirement age.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

Level 15

401K Match


@macuser_22 wrote:

Your company match has no bearing on your tax return.   Your own contributions are reported in box 12 on your W-2 and are not included in the W-2 box 1 taxable income.     The more that you contribute the lower taxable box 1 income that you will have.   That is the only tax difference.

 

Whether your overall financial situation would be better by investing in an self directed IRA that can purchase securities of your choice is something to discuss with a financial advisor.   There are advantages or disadvantages to both.

 

Depending on the terms of your 401(k) plan it might be possible to roll the 401(k) balance to a Traditional IRA at a financial institution, but not all plans allow that prior to retirement age.


I don't believe you can roll over or transfer a 401(k) to a private IRA if you are still employed by the sponsoring employer.  

 

Your investment choices are 401(k), private IRA (if allowed based on your income), private Roth IRA (if allowed based on your income), and a general taxable brokerage account.  Since there are many IRA trustees that will allow you to open a Roth account and make your own investments, I don't see any benefit to a brokerage account unless you first max out your Roth IRA contributions. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Level 15

401K Match


@Opus 17 wrote:

@macuser_22 wrote:

 

Depending on the terms of your 401(k) plan it might be possible to roll the 401(k) balance to a Traditional IRA at a financial institution, but not all plans allow that prior to retirement age.


I don't believe you can roll over or transfer a 401(k) to a private IRA if you are still employed by the sponsoring employer.  

 

It is called "An In-service Rollover" .  Not all 401(k) plans allow for it and those that do usually have a age limit (often must be age 55 or older) and usually only allow one such rollover a year.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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