While there aren't a lot of 401k contribution rules for 2010, in large part because they want to encourage you to use your account, there are a couple of important things you should be aware of.
The first thing is that you cannot withdraw from your account until you are fifty nine and a half years old without a penalty that will hurt you both now and once you reach retirement.
Because most accounts are traditional ones, where your contributions are taken out of your income before taxes are taken out, you haven't paid taxes on this money yet.
When withdraw from the account you have pay both state and federal taxes on this money.
There is also a ten percent early withdrawal penalty.
This can easily add up to anywhere from twenty to forty percent of the money you withdraw, depending on your tax bracket.
This hurts you both now and in the future, because it may effect the amount you'll be able to withdraw right now, and because you won't have as much money for your retirement.
This is true both directly because of the money you withdraw, and because you'll be missing out on the money you would have made on your investments over the years.
The best way to avoid needing to make an early withdrawal is to have an emergency fund saved in an easily accessible account so you don't have to turn to your retirement savings when things come up unexpectedly.
Another of the important contribution rules for 2010 is the contribution limit.
This changes on a yearly basis so you need to make sure to check this every year.
Currently this limit is set at $16,500, but if you're between the ages of fifty and fifty nine and a half there is an additional catch up contribution that you can take advantage of.
Keeping up to date with the 401k contribution rules can help you avoid any costly mistakes with your savings that could set you back on your goals.
The first thing is that you cannot withdraw from your account until you are fifty nine and a half years old without a penalty that will hurt you both now and once you reach retirement.
Because most accounts are traditional ones, where your contributions are taken out of your income before taxes are taken out, you haven't paid taxes on this money yet.
When withdraw from the account you have pay both state and federal taxes on this money.
There is also a ten percent early withdrawal penalty.
This can easily add up to anywhere from twenty to forty percent of the money you withdraw, depending on your tax bracket.
This hurts you both now and in the future, because it may effect the amount you'll be able to withdraw right now, and because you won't have as much money for your retirement.
This is true both directly because of the money you withdraw, and because you'll be missing out on the money you would have made on your investments over the years.
The best way to avoid needing to make an early withdrawal is to have an emergency fund saved in an easily accessible account so you don't have to turn to your retirement savings when things come up unexpectedly.
Another of the important contribution rules for 2010 is the contribution limit.
This changes on a yearly basis so you need to make sure to check this every year.
Currently this limit is set at $16,500, but if you're between the ages of fifty and fifty nine and a half there is an additional catch up contribution that you can take advantage of.
Keeping up to date with the 401k contribution rules can help you avoid any costly mistakes with your savings that could set you back on your goals.