KnowHow Archive

Plan Sponsor Guide Participant Guide

Retirement Savings Quiz


1. (b) Your contributions may be matched by your employer. With a Roth 401(k), your earnings accumulate on an after-tax basis, and your contributions are also made on an after-tax basis. Your contributions—Roth 401(k) and regular 401(k) combined—are subject to the current 401(k) deferral limits. However, those contributions can be matched by your employer.

2. (c) Up to half your vested account balance or $50,000, whichever is less. If your plan has a loan option (it is not required to), you generally can borrow from your retirement account, subject to the limitations noted above. Your program also may impose a minimum amount for the loan ($1,000 is typical), as well as charges for processing your loan request.

3. (b) A fund that invests in company stock cannot be a qualified default investment alternative. Generally speaking, these investment funds are a diversified mix of stocks and bonds that are invested with an eye toward a specific retirement date. This includes "target-date" funds but also can include funds that take into account your tolerance for investment risk (risk-based or lifestyle funds), as well as so-called "balanced funds," subject to certain conditions.

4. (d) 70 1/2. Those "required minimum distributions," or RMDs, generally must begin by April 1 of the calendar year following the calendar year in which you turn 70 1/2, though a participant’s first year’s RMD can be made as late as April 1 of the following year.

5. (c) Real estate fund. Now, most likely shouldn’t necessarily be read as "likely." However, according to the Government Accountability Office (GAO), some 401(k) plan participants had invested some of their 401(k) plan assets with these types of investment options and found those assets frozen during the last few years "because some of the investments in the real estate accounts—for example, an investment by the real estate fund in a high-rise building or other commercial property—had lost significant value and became difficult to sell." As always, read your prospectus and fund information sheets to make sure you understand the conditions under which such restrictions could be implemented.

Nevin E. Adams