What is a 401(k)?
A 401(k) plan is a tax advantaged retirement plan created by the Internal Revenue Service (IRS), is only available through an employer who offers it as a benefit to their employees. Here’s what you should know:
- Traditional 401(k) plans are tax-free deposits and you pay tax on the money when you make a withdrawal in retirement.
- You have options for 401(k) plans, including a Roth 401(k).
- Just like a Roth IRA, a Roth 401(k) taxes your contributions now, allowing you to take retirement distributions tax-free.
- This can have its benefits if you think you may be in a lower tax bracket now than when you enter retirement.
- Your tax advisor can help you understand the tax implications of each type.
What is a 401(k) Blackout Period?
A 401(k) blackout period is a period of time — usually up to 60 days — during which you cannot make changes to your investment options. This often occurs when you or your employer change 401(k) plan administrators. Plan participants should receive notice at least 30 days before the period starts, giving them opportunities to ask their providers or employers questions, plus review their investment options and make any changes.
During the time when your 401(k) plan provider is changing, you do not have access to your assets or your records and cannot see your investment options, make changes, or view your portfolio value. Any contributions you make (including any loan payments) to your 401(k) will still occur, though, and there is nothing inherently dangerous about this process.
401(k) Blackout Period FAQs
1. Why would my company change plan providers?
- It's current investments are not performing
- The associated fees are too high
- The plan administrator is leaving the business
- And more
2. How long does a blackout period last?
3. I can't see my funds, are they gone forever?
4. What if I need to access my funds?
5. Will this cost me anything?
6. What do I need to do before the blackout starts?
Have Additional 401(k) or Retirement Planning Questions?
Understanding investments is not always easy, but rest assured that 401(k) blackout periods are both normal and common. They are also highly regulated, so your plan administrator must take proactive steps to keep your money safe and working for you — even when you cannot see it. This is a normal and secure process, but it does cause plan participants worry and stress.
Speak with a trusted financial advisor today to have all your 401(k) blackout period questions answered, along with any other retirement and tax planning questions you may have. Our tax attorneys are experienced in setting up retirement income in a way that minimizes your future burden. The expert team at Silver Tax Group can help you figure out your best investment options to give you a worry-free retirement. Give us a call to set up a consultation.
