Growing Wealth Archives

Q: Can I put all of my bonus into a 401k?

Possibly. You can put all of your bonus in your 401k if you haven’t reached the contribution limit for that particular year, and if you won’t surpass it by adding all of your bonus.

Dec

2025

Should I Put My Bonus Into My 401(k)? Here’s What You Should Consider

By Paulina Likos | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

If you received a bonus and you’re wondering what to do with the bonus money, you’re not alone. Investing your bonus money in a tax-advantaged retirement account like a 401(k) has some tangible advantages. Not only will the extra cash help your nest egg to grow, you could also see some potential tax benefits.

Of course, we live in a world of competing financial priorities. You could also pay down debt, spend the money on something you need, save for a near-term goal — or splurge! The array of choices can be exciting — but if a secure future is your top goal, it’s important to consider a 401(k) bonus deferral.

Here are a few strategies to think about before you make a move.

Key Points

• Investing a bonus in a 401(k) can significantly enhance retirement savings and offer potential tax benefits.

• Bonuses are subject to income tax withholding, which may reduce the expected amount.

• Contribution limits for a 401(k) are $23,500 in 2025 and $24,500 in 2026 for those under age 50. Those aged 50 and over can make an additional catch-up contribution.

• If 401(k) contributions are maxed out, considering an IRA or a taxable brokerage account is beneficial.

• Allocating a bonus to a 401(k) or IRA can reduce taxable income for the year, potentially lowering the tax bill.

Receiving a Bonus Check

First, a practical reminder. When you get a bonus check, it may not be in the amount that you expected. This is because bonuses are subject to income tax withholding. Knowing how your bonus is taxed can help you understand how much you’ll end up with so you can determine what to do with the money that’s left, such as making a 401(k) bonus contribution. The IRS considers bonuses as supplemental wages rather than regular wages.

Ultimately, your employer decides how to treat tax withholding from your bonus. Employers may withhold 22% of your bonus to go toward federal income taxes. But some employers may add your whole bonus to your regular paycheck, and then tax the larger amount at normal income tax rates. If your bonus puts you in a higher tax bracket for that pay period, you may pay more than you expected in taxes.

Also, your bonus may come lumped in with your paycheck (not as a separate payout), which can be confusing.

Whatever the final amount is, or how it arrives, be sure to set aside the full amount while you weigh your options — otherwise you might be tempted to spend it.

💡 Quick Tip: Want to lower your taxable income? Start saving for retirement by opening an IRA account. The money you save each year in a traditional IRA is tax deductible (and you don’t owe any taxes until you withdraw the funds, usually in retirement).

What to Do With Bonus Money

There’s nothing wrong with spending some of your hard-earned bonus from your compensation. One rule of thumb is to set a percentage of every windfall (e.g. 10% or 20%) — whether a bonus or a birthday check — to spend, and save the rest.

To get the most out of a bonus, though, many people opt for a 401k bonus deferral and put some or all of it into their 401(k) account. The amount of your bonus you decide to put in depends on how much you’ve already contributed, and whether it makes sense from a tax perspective to make a 401(k) bonus contribution.

Contributing to a 401(k)

For 2025, the contribution limit for 401(k) plans is $23,500. Those 50 and older can add another $7,500, for a total of $31,000. Those aged 60 to 63 can contribute an additional $11,250, for a total of $34,750.

For 2026, the contribution limit for 401(k) plans is $24,500. Those 50 and older can add another $8,000, for a total of $32,500. Those aged 60 to 63 can contribute an additional $11,250, for a total of $35,750.

If you haven’t reached the limit yet, allocating some of your bonus into your retirement plan can be a great way to boost your retirement savings.

In the case where you’ve already maxed out your 401(k) contributions, your bonus can also allow you to invest in an IRA or a non-retirement (i.e. taxable) brokerage account.

Contributing to an IRA

If you’ve maxed out your 401k contributions for the year, you may still be able to open a traditional tax-deferred IRA or a Roth IRA. It depends on your income.

In 2025, the contribution limit for traditional IRAs and Roth IRAs is $7,000; with an additional $1,000 if you’re 50 or older. In 2026, the contribution limit for traditional IRAs and Roth IRAs is $7,500; with an additional $1,100 if you’re 50 or older.

However, if your income is $165,000 or more (for single filers) or $246,000 or more (for married filing jointly) in 2025, you aren’t eligible to contribute to a Roth. For 2026, you can’t contribute to a Roth if your income is $168,000 or more (for single filers) or $252,000 or more (for married filing jointly).

If you’re covered by a workplace retirement plan and your income is too high for a Roth, you likely wouldn’t be eligible to open a traditional, tax-deductible IRA either. You could however open a nondeductible IRA. To understand the difference, you may want to consult with a professional.

Contributing to a Taxable Account

Of course, when you’re weighing what to do with bonus money, you don’t want to leave out this important option: Opening a taxable account.

While employer-sponsored retirement accounts typically have some restrictions on what you can invest in, taxable brokerage accounts allow you to invest in a wider range of investments.

So if your 401(k) is maxed out, and an IRA isn’t an option for you, you can use your bonus to invest in stocks, bonds, exchange-traded funds (ETFs), mutual funds, and more in a taxable account.

Deferred Compensation

You also may be able to save some of your bonus from taxes by deferring compensation. This is when an employee’s compensation is withheld for distribution at a later date in order to provide future tax benefits.

In this scenario, you could set aside some of your compensation or bonus to be paid in the future. When you defer income, you still need to pay taxes later, at the time you receive your deferred income.

Your Bonus and 401(k) Tax Breaks

Wondering what to do with a bonus? It’s a smart question to ask. In order to maximize the value of your bonus, you want to make sure you reduce your taxes where you can.

One method that’s frequently used to reduce income taxes on a bonus is adding some of it into a tax-deferred retirement account like a 401(k) or traditional IRA. The amount of money you put into these accounts typically reduces your taxable income in the year that you deposit it.

Here’s how it works. The amount you contribute to a 401(k) or traditional IRA is tax deductible, meaning you can deduct the amount you save from your taxable income, often lowering your tax bill. (The same is not true for a Roth IRA or a Roth 401(k), where you make contributions on an after-tax basis.)

The annual contribution limits for each of these retirement accounts noted above may vary from year to year. Depending on the size of your bonus and how much you’ve already contributed to your retirement account for a particular year, you may be able to either put some or all of your bonus in a tax-deferred retirement account.

It’s important to keep track of how much you have already contributed to your retirement accounts because you don’t want to put in too much of your bonus and exceed the contribution limit. In the case where you have reached the contribution limit, you can put some of your bonus into other tax deferred accounts including a traditional IRA or a Roth IRA.

How Investing Your Bonus Can Help Over Time

Investing your bonus may help increase its value over the long-run. As your money potentially grows in value over time, it can be used in many ways: You can stow part of it away for retirement, as an emergency fund, a down payment for a home, to pay outstanding debts, or another financial goal.

While it can be helpful to have some of your bonus in cash, your money is typically better in a savings or investment account where it has the potential to work for you. If you start investing your bonus each year in either a tax-deferred retirement account or non-retirement account, this could help you save for the future.

Test your understanding of what you just read.

Investing for Retirement With SoFi

The yearly question of what to do with a bonus is a common one. Just having that windfall allows for many financial opportunities, such as saving for immediate needs — or purchasing things you need now. But it may be wisest to use your bonus to boost your retirement nest egg — for the simple reason that you may stand to gain more financially down the road, while also potentially enjoying tax benefits in the present.

The fact is, most people don’t max out their 401(k) contributions each year, so if you’re in that boat it might make sense to take some or all of your bonus and max it out. If you have maxed out your 401(k), you still have options to save for the future via traditional or Roth IRAs, deferred compensation, or investing in a taxable account.

Keeping in mind the tax implications of where you invest can also help you allocate this extra money where it fits best with your plan.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Help grow your nest egg with a SoFi IRA.

FAQ

Is it good to put your bonus into a 401(k)?

The short answer is yes. It might be wise to put some or all of your bonus in your 401(k), depending on how much you’ve contributed to your workplace account already. You want to make sure you don’t exceed the 401(k) contribution limit.

How can I avoid paying tax on my bonus?

Your bonus will be taxed, but you can lower the amount of your taxable income by depositing some or all of it in a tax-deferred retirement account such as a 401(k) or IRA. However, this does not mean you will avoid paying taxes completely. Once you withdraw the money from these accounts in retirement, it will be subject to ordinary income tax.

Can I put all of my bonus into a 401(k)?

Possibly. You can put all of your bonus in your 401(k) if you haven’t reached the contribution limit for that particular year, and if you won’t surpass it by adding all of your bonus. For 2025, the contribution limit for a 401(k) is $23,500 if you’re under age 50; those 50 and up can contribute an additional $7,500, for a total of $31,000. Those aged 60 to 63 may contribute an additional $11,250 instead of $7,500, for a total of $34,750. In 2026, the contribution limit for a 401(k) is $24,500 if you’re under age 50; those 50 and up can contribute an additional $8,000, for a total of $32,500. Those aged 60 to 63 may contribute an additional $11,250 instead of $8,000, for a total of $35,750.

You may also be interested in:

How Much Should I Contribute to My 401k?

Guide to Maxing Out Your 401(k)

The Average 401(k) Balance by Age

Photo credit: iStock/Tempura

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

Dec

2025

Investing Checklist: Things to Do Before the End of 2022

Investing Checklist: Things to Do Before the End of 2025

By Samuel Becker | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

There are numerous things that investors can and perhaps should do before the clock strikes midnight on New Year’s Eve, such as maxing out retirement or college savings account contributions, and harvesting tax losses.

Read on to find out what should probably be on your investing checklist for the end of the year, what to consider tackling before your tax return is due in April, and how some simple moves this December can help set you up nicely for 2025, 2026, and beyond.

Key Points

• Investors should maximize their 401(k) contributions by the end of 2025. They can contribute up to $23,500 for the year, plus an additional $7,500 for those over 50. People 60 to 63 can contribute a higher catch-up limit of $11,250 in 2025.

• Tax-loss harvesting, a strategy to offset investment gains with losses and reduce tax burdens, should be considered before year-end if applicable.

• Contributing to a 529 college savings plan before the year ends can offer state tax deductions, depending on the state.

• Reviewing and updating estate plans and insurance policies is crucial to ensure they are current and accurate.

• Donating appreciated stocks to charity by December 31 can provide a tax deduction for the full market value of the shares.

End-of-Year vs Tax-Day Deadlines

Before diving into the year-end investing checklist, it’s important to remember that there are a couple of key distinctions when it comes to the calendar. Specifically, though the calendar year actually ends on December 31 of any given year, Tax Day is typically in the middle of April (April 15, usually). That’s the due date to file your federal tax return, unless you file for an extension.

As it relates to your investing checklist, this is important to take into account because some things, like maxing out your 401(k) contributions must be done before the end of the calendar year, while others (like maxing out contributions to your IRA account) can be done up until the Tax Day deadline.

In other words, some items on the following investing checklist will need to be crossed off before New Year’s Day, while others can wait until April.

7 Things to Do With Your Investments No Later Than Dec. 31

Here are seven things investors can or should consider doing before the calendar rolls around to 2026.

1. Max Out 401(k) Contributions

Perhaps the most beneficial thing investors can do for their long-term financial prospects is to max out their 401(k) contributions. A 401(k) is an employer-sponsored retirement account, where workers can contribute tax-deferred portions of their paychecks.

There are also Roth 401(k) accounts, which may be available to you, which allow you to preemptively pay taxes on the contributions, allowing for tax-free withdrawals in the future.

You can only contribute a certain amount of money per year into a 401(k) account, however. For 2025, that limit is $23,500, and those over 50 can contribute an additional $7,500, for a total of $31,000. And in 2025, under SECURE 2.0, those aged 60 to 63 can make a higher catch-up limit of $11,250 (instead of $7,500) for a total of $34,750.

In 2026, the contribution limit rises to $24,500, with a $8,000 catch-up provision if you’re 50 and up, for a total of $32,500. And again, under the SECURE 2.0 Act, a higher catch-up limit of $11,250 (instead of $8,000) applies to individuals ages 60 to 63 in 2026, for a total of $35,750.

So, if you are able to, it may be beneficial to contribute up to the $23,500 limit for 2025 before the year ends. After December 31, any contributions will count toward the 2026 tax year.

2. Harvest Tax Losses

Tax-loss harvesting is an advanced but popular strategy that allows investors to sell some investments at a loss, and then write off their losses against their gains to help lower their tax burden.

Note that investment losses realized during a specific calendar year must be applied to the gains from the same year, but losses can be applied in the future using a strategy called a tax-loss carryforward. But again, tax-loss harvesting can be a fairly complicated process, and it may be best to consult with a professional

3. Consider 529 Plan Contributions

A 529 college savings plan is used to save for education expenses. There are two basic types of 529 plans, but the main thing that investors should focus on, as it relates to their year-end investing checklist, is to stash money into it before January as some states allow 529 contributions as tax deductions.

There is no yearly federal contribution limit for 529 plans — instead, the limit is set at the state level. Gift taxes, however, may apply, which is critical to consider.

4. Address Roll-Over Loose Ends

Another thing to check on is whether there are any loose ends to tie up in regard to any account roll-overs that you may have executed during the year.

For example, if you decided to roll over an old 401(k) into an IRA at some point during the year, you’ll want to make sure that the funds ended up with your new brokerage or retirement plan provider.

It may be easy to overlook, but sometimes checks get sent to the wrong place or other wires get crossed, and it can be a good idea to double-check everything is where it should be before the year ends.

5. Review Insurance Policies

Some employers require or encourage employees to opt into certain benefits programs every year, including insurance coverage. This may or may not apply to your specific situation, but it can be a good idea to check and make sure your insurance coverage is up to date — and that you’ve done things like named beneficiaries, and that all relevant contact information is also current.

6. Review Your Estate Plan

This is another item on your investing checklist that may not necessarily need to be done by the end of the year, but it’s a good idea to make a habit of it: Review your estate plan, or get one started.

There are several important documents in your estate plan that legally establish what happens to your money and assets in the event that you die. If you don’t have an estate plan, you should probably make it an item on your to-do list. If you do have one, you can use the end of the year as a time to check in and make sure that your heirs or beneficiaries are designated, that there are instructions about how you’d prefer your death or incapacitation to be handled, and more.

7. Donate Appreciated Stocks

Finally, you can consider donating stocks to charity by the end of the year. There are a couple of reasons to consider a stock donation: One, you won’t pay any capital gains taxes if the shares have appreciated, and second, you’ll be able to snag a tax deduction for the full market value of the shares at the time that you donate them. The tax deduction limit is for up to 30% of your adjustable gross income — a considerable amount.

Remember, though, that charitable donations must be completed by December 31 if you hope to deduct the donation for the current tax year.

3 Things for Investors to Do by Tax Day 2026

As mentioned, there are a few items on your investing checklist that can be completed by Tax Day, or April 15, 2026. Here are the few outstanding items that you’ll have until then to complete.

1. Max Out IRA Contributions

One of the important differences between 401(k)s and IRAs is the contribution deadline. While 401(k) contributions must be made before the end of the calendar year, investors can keep making contributions to their IRA accounts up until Tax Day 2026, within the contribution limits of course.

So, if you want to max out your IRA contributions for 2025, the limit is $7,000. But people over 50 can contribute an additional $1,000 — and you’ll have until April to contribute for 2025 and still be able to deduct contributions from your taxable income (assuming it’s a tax-deferred IRA, not a Roth IRA).

The contribution limits rise in 2026 to $7,500, and a $1,100 catch-up provision for those 50 and up. And some taxpayers may be able to deduct their contributions, too, under certain conditions.

2. Max Out HSA Contributions

If you have a health savings account (HSA), you’ll want to make sure you’ve hit your contribution limits before Tax Day, too. The contribution limits for HSAs in 2025 are $4,300 for self-only coverage and $8,550 for family coverage. People over 55 can contribute an additional $1,000. For 2026, the contribution limits are $4,400 for self-only coverage and $8,750 for family coverage. People aged 55 and up can contribute an additional $1,000 in both 2025 and 2026.

3. Take Your RMD (if Applicable)

If you’re retired, you may need to take a required minimum distribution (RMD) from your retirement account by the beginning of April next year, if it’s your first RMD. But if you’ve taken an RMD before, you’ll need to do so before the end of 2025 — so, be sure to check to see what deadline applies to your specific situation.

This generally only applies to people who are in their 70s (typically age 73 if you reach age 72 after December 31, 2022), but it may be worth discussing with a professional what the best course of action is, especially if you have multiple retirement accounts or if you have an inherited account.

The Takeaway

Doing a year-end financial review can be extremely beneficial, and a checklist can help make sure you don’t miss any important steps for 2025 — and set you up for 2026. That investing checklist should probably include things like maxing out contributions to your retirement accounts, harvesting tax losses in order to manage your tax bill, and possibly even taking minimum required distributions. Everyone’s situation is different, so you’ll need to tailor your investing checklist accordingly.

Also, it’s important to keep in mind that you may have until Tax Day in April to get some of it done — though it may be good practice to knock everything out by the end of the year. If you’re only beginning to invest, keeping this list handy and reviewing it annually can help you establish healthy financial habits.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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Dec

2025

How to Invest Your 401(k)

By Samuel Becker | Growing Wealth, invest, Preparing for Retirement | No Comments

Utilizing your 401(k) retirement account can seem daunting to beginner investors, but there are numerous strategies and tactics you can use to improve returns. Before any of that happens, though, investors will want to be sure to sign up for a 401(k) retirement account through your employer, which is often as simple as filling out a form.

As for the rest? Investing in your 401(k) doesn’t have to be complicated. From understanding your investment options and choosing your portfolio, to common mistakes to avoid, read on to get into the nitty-gritty.

How to Invest Your 401(k)

Investing in your 401(k) can often be as simple as making some basic investment choices. But it’s also good to know exactly how the account works.

As a refresher, a 401(k) is a type of tax-deferred retirement account sponsored by your employer. If you work for a non-profit, a school district, or the government instead of a company, your retirement plan might be a 403(b) or a 457(b) plan. All of these plans are employer-sponsored, meaning they pick the plan — and most of the information here applies to all three types of accounts.

You and your employer can both contribute to a 401(k). Many employers match employee contributions to some degree, and some may even contribute a portion of company profits to employees’ accounts (that’s known as a 401(k) profit-sharing plan).

Contributions are capped by the IRS: For the 2025 tax year, the maximum amount an individual might contribute to a 401(k) is $23,500, with an additional $7,500 in catch-up contributions allowed for people aged 50 and over. Those aged 60 to 63 may contribute up to an additional $11,250 instead of $7,500, thanks to SECURE 2.0. The total amount that might be contributed to a 401(k), including matching funds and other contributions from an employer, is $70,000 (or $77,500 for people aged 50 and older, and $81,250 for those aged 60 to 63).

For the 2026 tax year, the maximum amount an individual could contribute to a 401(k) is $24,500, with an extra $8,000 in catch-up contributions allowed for people aged 50 and over. And those aged 60 to 63 may again contribute an additional $11,250 instead of $8,000 in 2026. The total amount that might be contributed to a 401(k), including matching funds and other contributions from an employer, is $72,000 (or $80,000 for people aged 50 and older, and $83,250 for those aged 60 to 63).

With all of that in mind, here are some things to remember as you start to invest in your 401(k), or look for ways to improve your returns.

Assess Your Goals

Investors should really take the time to assess their overall investment goals, and think about how their 401(k) fits into achieving those goals. Each investor will have different goals, and that means they’ll be willing to take different risks and be on different timelines as to when they want to reach those goals.

Again, this will vary from investor to investor, but before making any moves, it can be helpful to think more deeply about goals. Talking to a financial professional may be helpful, too.

Determine Your Risk Tolerance

Every investment comes with risk. The key is assessing your comfort level with risk now, and going forward. Whether you’re picking a target date fund or making your own mix of investments, you’ll want to allocate your money based on your needs and risk tolerance.

One rule of thumb when it comes to retirement investments is that the younger you are, the more risk you might be able to handle. The thinking goes that you will have more time to recover from market drops to allow riskier investments to pay off.

On the other hand, people closer to retirement may choose to adjust their investments. There, the goal would be to minimize risk, so that the savings they will soon need would not be overly impacted by a market downturn.

Look at Diversification

Diversification is critical when building a portfolio, so investors should keep an eye on what’s in their portfolio. An individual employee may not have a whole lot of say as to what exactly is going into their 401(k) investment mix, but you’ll want to keep an eye on things and stay abreast of the way that your portfolio manager is diversifying for you.

Target-Date Funds

A target-date fund is a mutual fund with a passive mix of investments aimed at a “target” retirement date. The mix of assets (stocks and bonds) typically becomes more conservative as your target retirement date nears. For people who prefer a hands-off approach, these funds might be a good investment option.

Something to keep in mind is that you don’t necessarily have to pick the target date based on when you actually plan to retire. If you feel the mix of assets is too aggressive, you might choose to select an earlier retirement year to take less risk.

Factors to Consider

Additionally, there are many factors investors will need to consider as it relates to their 401(k), such as their time horizon, expenses, and contribution levels.

• Time horizon: How long do you plan to invest? Investors will want to keep long-term returns in mind, and their investment mix and other choices can have an impact on their returns.

• Expenses: Investments often have expense ratios or other fees that can eat into returns, which is another thing to keep in mind.

• Contribution levels: The more you save for retirement and the earlier you start saving, the better off you’ll likely be in retirement. If you’re lucky enough to have an employer that matches your contributions, at a minimum you’ll probably want to take full advantage of your employer match.

Remember: Maximizing your 401(k) tends to benefit you in the long run. 401(k) employer contributions vary, so it makes sense to find out how matching works at your company, and then contribute at least enough to get that “free money.”

401(k) Investing: Things to Keep In Mind

There are a couple of other things that investors may want to try and keep in mind in regard to their 401(k), such as leaving old accounts open, and over-investing in specific funds.

Putting Everything into a Money Market Fund

A money market fund is a mutual fund made up of relatively low-risk, short-term securities. It’s a tempting move, because it feels like you don’t risk losing money. You’ll want to gauge whether your investing returns are outpacing inflation, accordingly. That may be the case if your money is only being invested in a money market fund — in fact, that may be the default if employees don’t make investment selections for their portfolio. You’ll need to check with your plan provider to find out.

Leaving Old 401(k)s Open

When you leave your current employer, it’s often a good idea to roll over your 401(k) into a traditional or Roth IRA. Most 401(k) accounts have fees associated with them. While typically an employer will pay those fees while you work for them, once you’re no longer with the company, many will stop paying them for you.

By moving your money into an account of your choosing, you have more control over the fees you pay. You’ll also generally have a broader range of investment choices.

The Takeaway

Investing in a 401(k) retirement savings account is fairly simple, especially since you can set it up through your employer. Whether you are typically a hands-on investor or prefer a hands-off approach, you can get your 401(k) contributions up and running — and start saving money for your future.

If you have an old 401(k), as noted above, you might want to consider doing a rollover to an IRA account so you can better manage your savings in one place.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Help grow your nest egg with a SoFi IRA.

🛈 While SoFi does not offer 401(k) plans at this time, we do offer a range of Individual Retirement Accounts (IRAs).

FAQ

Can I invest my 401(k) on my own?

It may be possible to invest in your 401(k) on your own, as some employers offer a self-directed plan option, which gives investors more choice and say over their portfolio.

Is it possible to make my 401(k) grow faster?

To make your 401(k) grow faster, you can look at increasing your contributions (up to a specified limit), or changing your investment mix. But note that many investments with higher growth potential tend to have higher associated risks.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

Dec

2025

What Is a Salary Reduction Contribution Plan?

By Mike Zaccardi, CMT, CFA | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

A salary reduction contribution plan allows employees to reduce their taxable income by investing for retirement. With this type of plan, an employee’s salary isn’t really reduced; rather the employer deducts a percentage of their salary and deposits the funds in a retirement savings plan where the money can grow tax deferred.

Common employer-sponsored retirement plans include 401(k)s, 403(b)s, and SIMPLE IRAs. Employee contributions — also called elective deferral contributions — are typically made with pre-tax money, effectively reducing the participant’s taxable income and often lowering their tax bill. Some plans feature an after-tax Roth contribution option, too.

You may already be contributing to a salary reduction contribution plan, although your company may not call it that. These plans can be a valuable way to boost your retirement savings, and offer you a tax break. Here’s what you need to know.

Salary Reduction Contribution Plans Explained

A salary reduction contribution plan helps workers save and invest for retirement through their employer via several types of retirement accounts. Money is typically deposited in a retirement account such as a 401(k), 403(b), or SIMPLE IRA on a pre-tax basis through recurring deferrals (aka contributions) on behalf of the employee.

Employees typically select the percentage they wish to deposit, e.g. 3%, 10%, or more. That percentage is deducted from an employee’s paycheck automatically, and deposited in their retirement account. Sometimes a specific dollar amount is established as the salary reduction contribution amount.

The upshot for the worker is that they can delay paying taxes on the amount of the salary reduction for many years, until they withdraw money from the account during retirement. Like a traditional 401(k) or 403(b), these accounts can be tax deferred; Roth options are considered after tax (because you deposit after-tax funds, but pay no tax on withdrawals). Retirement contributions may offer decades of compounded investment returns without taxation. Essentially, retirement contributions through an employer’s plan means saving money from your salary.

There are also SIMPLE IRA salary reduction agreements sometimes offered by small businesses with 100 or fewer employees: “SIMPLE” is short for “Savings Incentive Match Plan for Employees.”

A Salary Reduction Simplified Employee Pension Plan (SARSEP), on the other hand, is a simplified employee pension plan established before 1997.

How Salary Reduction Contribution Plans Work

Salary reduction contribution plans are established between a worker and their employer. The two parties agree to have a set percentage or a dollar amount taken from the employee’s salary and deposited into a tax-advantaged retirement plan. That money can then be invested in stock or bond mutual funds, or other investments offered by the plan.

With pre-tax contributions, the employee has a reduced paycheck but gets current-year tax savings. With after-tax contributions, as in a Roth account, taxes are paid today while the account can potentially grow tax-free through retirement; withdrawals from a Roth account are tax free.

Example of a Salary Reduction Contribution Plan

Here’s an example of how a salary reduction contribution plan agreement might work:

Let’s say an employee at a university has a $100,000 salary and wishes to save 10% of their pay in a pre-tax retirement account. The school has a 403(b) plan in place. The worker contacts their Human Resources department to ask about submitting a salary reduction agreement form. On the form, the worker chooses an amount of their salary to defer into the 403(b) plan (10%).

Typically they also select investments from a lineup of mutual funds or exchange-traded funds (ETFs).

Come payday, the employee’s paycheck will look different. If the usual biweekly gross earnings amount is $3,846 ($100,000 salary divided by 26 pay periods, per year), then $384.60, or 10% of earnings, is deducted from the employee’s paycheck and deposited into the 403(b) and invested, assuming the employee has selected their desired investment options.

Depending on other deductions, the employee’s new taxable income might be $3,461.40. The contribution effectively reduced the worker’s salary, potentially lowering their tax bill at the end of the year.

If the worker is in the 22% marginal income tax bracket, the $10,000 annual deferral amounts to an annual federal income tax savings of $2,200 per year.

Bear in mind that withdrawals from the 403(b) plan are taxable with pre-tax salary reductions. We’ll look at salary reduction plan withdrawal rules later.

Pros & Cons of Salary Reduction Contribution Plans

Although your employer may offer a salary reduction contribution plan like a 401(k) or SIMPLE IRA salary reduction agreement for retirement, it’s not required to participate. Before deciding whether you want to join your organization’s plan, here are some advantages and disadvantages to consider.

Pros

A salary reduction contribution offers employees the chance to reduce their current-year taxable income. A lower salary defers taxation on the money you save, until retirement. For young workers, that could mean decades of compounding returns without having to pay taxes along the way.

For those who have the option of choosing to open a Roth account, taxes are paid in the current year, but withdrawals are tax free (as long as certain criteria are met). Also, contributions to a Roth 401(k) or Roth 403(b) plan can grow tax-free through retirement.

What’s more, the employer might offer their own contribution such as a matching contribution. Typically, an employer might match employees’ contributions up to a certain amount: e.g. they’ll match 50 cents for every dollar an employee saves, up to 6% of their salary.

Another upside is that lowering one’s salary through automated savings can help an individual live on less money and avoid spending beyond their means — which may help establish long-term savings habits. Thus, contributing to a salary reduction plan can be a step toward creating a financial plan.

Cons

Like many aspects of personal finance, salary reduction contributions can be a balancing act between meeting your obligations today and providing for your future self.

Saving for the future can mean forgoing some pleasure in the present, similar to the concept of delayed gratification. Maybe you decide to postpone a vacation or purchase of a new car in exchange for a more robust retirement account balance.

Employees should also weigh the likelihood of needing money in the event of an emergency. Taking early withdrawals or borrowing from your 401(k) account can be costly, or may come with penalties, versus having extra cash in a checking or savings account. In most cases if you take out a loan from an employer-sponsored plan, you would have to repay the loan in full if you left your job.

Salary Reduction Contribution Limits

Annual salary reduction contribution limits can change each year. The Internal Revenue Service (IRS) determines the yearly maximum contribution amount. For 2025, the most a worker can contribute to a 401(k) or 403(b) is $23,500. For those age 50 and older, an additional $7,500 contribution is permitted. For 2025, those aged 60 to 63 may contribute an additional $11,250 (instead of $7,500) to their 401(k) plan.

In 2026, a worker can contribute up to $24,500 to a 401(k) or 403(b), and those 50 and older can contribute an additional $8,000 in catch-up contributions. For 2026, those aged 60 to 63 may contribute an additional $11,250 (instead of $8,000) to their 401(k) plan.

A SIMPLE IRA salary reduction agreement has different limits. For 2025, a SIMPLE IRA’s annual maximum contribution is $16,500 with a catch-up contribution of up to $3,500 for those age 50 and older. For 2026, the annual maximum SIMPLE IRA contribution limit is $17,000 and $4,000 for those 50 and up. For 2025 and 2026, those aged 60 to 63 may contribute an additional $5,250 (instead of $3,500 or $4,000 respectively) to their SIMPLE IRA.

Salary Reduction Contribution Plan Withdrawal Rules

There are many rules regarding salary reduction contribution plan withdrawals.

At a high level, when an employee withdraws money from a tax-deferred retirement account, they will owe income tax on the money. If you withdraw money before age 59 ½, a 10% early-withdrawal tax might be applied.

There can be some exceptions to these rules, but it’s best to consult with a professional.

Should you withdraw money when you leave your employer? While taking a lump sum is possible under those circumstances, it may not be your best choice: You’d owe taxes on the full amount, and you’d risk spending money that’s meant to support you when you’re older.

The standard rule of thumb is that individuals who are leaving one employer should consider rolling over their retirement account to an IRA, or their new employer’s plan. In that case there are no penalties or taxes owed, and the money is once again secured for the future.

The Takeaway

Salary reduction contribution plans can help workers save money for retirement on a pre-tax or after-tax basis. Steadily putting money to work for your future is a major step toward building a solid long-term financial plan. And in many cases you will reap a tax advantage in the present — or in the future.

That said, there are important pros and cons to weigh when deciding whether you should contribute via a salary reduction plan. You may have another strategy. But if you don’t, you might want to consider opting into your employer’s plan for the benefits it can provide.

An important point to know: Even when you join a salary reduction plan, you can still open up an IRA online to boost your savings. And if you leave your job, you can roll over your salary reduction retirement account to an IRA without paying taxes or penalties.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

Does a 401(k) reduce salary?

Not really. Contributions toward a traditional 401(k) retirement plan are a tax-deductible form of savings that effectively reduce an individual’s taxable income. In that regard, making retirement contributions on a pre-tax basis can reduce someone’s salary (but you still have the money in your retirement account).

Also, some plans allow for after-tax contributions which also reduce the size of your paycheck, but are not tax deductible.

What does employee salary reduction mean?

Employee salary reduction means that money is automatically deducted from an employee’s paycheck and contributed to a retirement plan. Money moves into a plan such as a 401(k), 403(b), or a SIMPLE IRA. The account is in the employee’s name, and they decide how to invest the funds.

What is the difference between SEP and SARSEP?

A SEP is known as a Simplified Employee Pension Plan. A SEP plan allows employers to contribute to traditional IRAs (called SEP IRAs) for their employees. The IRS states that a business of any size, even self-employed, can establish a SEP. These plans are common in the small business world.

A SARSEP, on the other hand, is a simplified employee pension plan established before 1997. A SARSEP includes a salary reduction arrangement. The employee can choose to have the employer contribute a portion of their salary to an IRA or annuity. Per the IRS, a SARSEP may not be established after 1996.

Photo credit: iStock/visualspace

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

Dec

2025

Benefits, Drawbacks, and Options of a Self-Directed 401(k) Plan

By Brian O'Connell | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

Table of Contents

What Is a Self-Directed 401(k) Account?
Who Is Eligible for a Self-Directed 401(k)?
How to Set Up a Self-Directed 401(k)
Pros and Cons of Self-Directed 401(k)s
How Much Money Can be Put in a Self-Directed IRA?
Common Self-Directed 401(k) Investments
Investments That Aren’t Allowed Under Self-Directed 401(k) Plan Rules
FAQ

Self-directed 401(k) accounts aren’t as common as traditional 401(k) plans, but they can be of interest to DIY-minded investors.

Self-directed 401(k) plans — which may be employer-sponsored or available as a solo 401(k) for self-employed individuals — expand account holders’ investment choices, giving them more control over their own retirement plans. Instead of being limited to a packaged fund, an investor can choose specific stocks, bonds, mutual funds, and possibly even alternative investments, in which to invest their retirement money.

Key Points

• Eligibility for a self-directed 401(k) requires taxable income and employment by a company offering the plan or being self-employed with no employees except a spouse.

• Setting up a self-directed 401(k) involves establishing the account and then funding it by transferring funds from another 401(k) or IRA, using funds from a company received through profit-sharing, or making direct contributions.

• Benefits of a self-directed 401(k) include more investment options, tax deferral, potential employer matching, and potential diversification with alternative assets.

• Drawbacks include higher risks, especially with alternative assets; higher fees; and significant time spent managing the account.

• Prohibited investments are real estate with family ties, loans to family members, and transactions offering investment benefits beyond returns.

What Is a Self-Directed 401(k) Account?

The key promise of self-directed 401(k) plans is control. They allow retirement plan savers to basically act as managers for their own retirement funds.

A self-directed 401(k) plan offers expanded investment choices, including stocks, bonds, funds, and cash, and potentially alternative investments like real estate investment trusts (REITs) and commodities, if the plan allows for these alternative investments.

For a plan holder who believes they have the investment know-how to leverage better returns than a managed 401(k) or target-date fund, a self-directed 401(k) may be an appealing choice.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Who Is Eligible for a Self-Directed 401(k)?

As long as your employer offers a self-directed 401(k), and you have earned taxable income for the current calendar year, you can enroll.

Alternatively, if you are self-employed and own and run a small business alone, with no employees (aside from a spouse), and your business earns an income, you are also eligible. You can search for a financial institution that offers self-directed plans, which might include a solo 401(k).

This is one of the self-employed retirement options you may want to consider.

How to Set Up a Self-Directed 401(k)

Setting up a self-directed 401(k) plan can be fairly straightforward. Once a 401(k) or solo 401(k) account is established, individuals can fund it in the following ways:

• Plan transfer. Funds can be shifted from previous or existing 401(k) plans and individual retirement accounts (IRAs). However, Roth IRAs can’t be transferred.

• Profit sharing. An employee receiving funds from a company through profit sharing can use that money to open a self-directed 401(k) plan — up to 25% of the profit share amount.

• Direct plan contributions. Any income related to employment can be contributed to a self-directed 401(k) plan.

Recommended: How to Manage Your 401(k)

Pros and Cons of Self-Directed 401(k)s

Like most investment vehicles, self-managed 401(k) plans have their upsides and downsides.

Pros of Self-Directed 401(k) Plans

These attributes are some of the self-directed 401(k) plan advantages:

• More options. Self-directed 401(k) plans allow retirement savers to gain more control, flexibility, and expanded investment choices compared to traditional 401(k) plans.

• Tax deferral. Like regular 401(k) plans, self-directed 401(k) plan contributions and asset gains are tax-deferred.

• Employee matching. Self-directed 401(k) plans allow for employer matching contributions, potentially paving the way for more robust retirement plan growth.

• Plan diversity. Account holders can invest in assets not typically offered to 401(k) plan investors. This potentially includes alternative investments like REITs, precious metals like gold, silver and platinum, and private companies, depending on what the 401(k) plan allows, thus lending additional potential for diversity to self-directed 401(k) plans.

Cons of Self-Directed 401(k) Plans

These caveats and concerns are most often associated with self-directed 401(k) plans:

• Higher-risk investments. Historically, alternative investments come with more volatility — and hence more risk — than stocks and bonds.

• Diversification is on the investor. You’ll need to choose among stocks, bonds and funds to augment your self-directed 401(k) plan asset allocation.

• Higher fees. Typically, self-directed employer retirement plans cost employees more to manage, especially if an investor makes frequent trades.

• Larger time investment. Since self-directed 401(k) plans offer access to more investment platforms, savers will likely need to spend more time doing their due diligence to research, select, and manage their plan options, especially in the area of risk assessment.

How Much Money Can be Put in a Self-Directed IRA?

The amount an investor can contribute to a self-directed IRA is the same as the amount that can be contributed to a traditional IRA account. The annual contribution limit is $7,000 for tax year 2025. Those 50 and older can contribute an additional $1,000 to a self-directed IRA in 2025 for a total of $8,000 per year. For tax year 2026, the annual contribution limit is $7,500. Those 50 and older can contribute an extra $1,100 for a total of $8,600 in 2026.

For a self-directed 401(k), the amount that can be contributed is the same as the contribution limits for a traditional 401(k). For 2025, the limit is $23,500. Those 50 and older can make an additional catch-up contribution of up to $7,500, for a total of up to $31,000. In 2025, those aged 60 to 63 may contribute an additional $11,250 (instead of $7,500), for a total of $34,750.

For 2026, the contribution limit is $24,500. Those 50 and older can contribute an additional catch-up of $8,000, for a total of $32,500. And in 2026, those 60 to 63 may again contribute an additional $11,250 (instead of $8,000), for a total of $35,750.

Recommended: Guide to Self-Directed IRAs

Common Self-Directed 401(k) Investments

The ability to choose from an expanded list of investment categories may be an intriguing benefit for a 401(k) plan holder who believes they have the investment know-how to leverage better returns from those investments.

However, the key is understanding what potential opportunities and what risks certain self-directed investment vehicles bring to the table. Here’s a closer look at two alternative investments that may be offered by some self-directed 401(k) plans.

Real Estate Investment Trusts (REITs)

Through a REIT, individuals with a self-directed 401(k) plan can potentially invest in residential or commercial properties with the goal of income generation — without having to actually buy property. A REIT is a company that owns and maintains different types of properties; investors can buy shares in the REIT.

Examples of properties that might be in a REIT include:

• Apartment buildings

• Hotels

• Office buildings

• Single-family homes

• Shopping malls or other retail centers

• Storage facilities and warehouses

• Health care facilities

REITs can be publicly traded or private. To invest in a publicly-traded REIT with a self-directed 401(k) plan, an investor would use their 401(k) funds to purchase shares in the REIT. The REIT would then pay out dividends on the income collected through rent, mortgages, and so on. REITs are required to distribute at least 90% of its taxable income to shareholders each year as dividends.

An investor might also choose to invest in REIT mutual funds or REIT exchange-traded funds (ETFs). These vehicles can provide ways to diversify holdings.

However, REITs come with risks. For example, they can be affected by fluctuations in the real estate market, such as falling property values or reduced occupancy demand. In addition, when interest rates rise, REIT prices may drop, which could lower the value of the investment. Individuals with a self-directed 401(k) should fully research and understand the risks of investing in a REIT.

Precious metals

Investing in certain precious metals like gold, silver, and platinum may be allowable with some self-directed 401(k) plans. However, these precious metals must meet specific requirements by the IRS — including purity standards and storage restrictions — to be held in a self-directed 401(k). Self-directed 401(k) plan participants may be able to invest in precious metals more easily via stocks or certain commodity funds — but again, only if their plan allows such investments.

It’s essential to remember that precious metal investing can be high risk, since gold, silver, and other metals can be highly volatile in value. Potential investors would need to be well prepared for that kind of risk.

Investments That Aren’t Allowed Under Self-Directed 401(k) Plan Rules

While there are a number of different types of investment vehicles that are included in many self-directed 401(k) plans, regulatory rules do prohibit specific investment activities tied to several of those asset classes. The following investment strategies and associated transactions, for example, would not pass muster in self-directed 401(k) plans.

Real Estate With Family Ties

While investing in REITS may be allowed in some self-directed 401(k) plans, using real estate for extended personal gain is not allowed. For example, that could include buying an apartment and allowing a family member to live there, or purchasing a slice of a family business and holding it as a 401(k) plan asset. Neither of these scenarios is allowed under 401(k) plan regulatory rules.

Loans

Self-directed 401(k) plan consumers may not loan any plan money to family members or sign any loan guarantees on funds used in a self-directed 401(k) plan.

No Investment Benefit Beyond Asset Returns

Self-directed 401(k) plan holders cannot earn “extra” funds through transactions linked to plan assets. For example, a plan holder can invest in a REIT under 401(k) plan rules (as long as their plan allows for it) but they cannot charge any management fees nor receive any commissions from the sale of that property.

Basically, a self-directed 401(k) plan participant cannot invest in any asset category that leads to that plan participant garnering a financial benefit that goes beyond the investment appreciation of that asset.

The Takeaway

While self-directed 401(k) plans can add value to a retirement fund, self-directed retirement planning is not for everyone.

This type of account typically requires more hands-on involvement from the plan holder than a traditional 401(k) fund does, and it may incur more fees. Additionally, investing in alternative investments comes with higher risk, which may not be suitable for some investors. Another type of retirement account may be a better option in this case.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

🛈 While SoFi does not offer 401(k) plans at this time, we do offer a range of individual retirement accounts (IRAs).

FAQ

What is the difference between an individual 401(k) and a self-directed 401(k)?

A self-directed 401(k) gives account holders more investment choices, as well as more control over their own retirement plans. Instead of being limited to a packaged fund as they would be with an individual 401(k), an investor can choose specific stocks, bonds, mutual funds, and potentially even alternative investments (depending on what the plan allows), in which to invest their retirement money.

Can I roll my traditional 401(k) into a self-directed 401(k)?

Yes. You can shift funds from a previous or existing 401(k) plan or individual retirement account (IRA) into a self-directed 401(k). The exception to this is a Roth IRA, which can’t be transferred.

How is a self-directed 401(k) taxed?

Like regular 401(k) plans, all self-directed 401(k) plan contributions and asset gains are tax-deferred until withdrawn. With self-directed 401(k)s, there is a 10% tax penalty for early withdrawals (before age 59 ½), the same as with traditional 401(k)s.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.

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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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SOIN-Q325-110
CN-Q425-3236452-84

Receiving a Bonus Check

What to Do With Bonus Money

Contributing to a 401(k)

Contributing to an IRA

Contributing to a Taxable Account

Deferred Compensation

Your Bonus and 401(k) Tax Breaks

How Investing Your Bonus Can Help Over Time

Investing for Retirement With SoFi

FAQ

Is it good to put your bonus into a 401(k)?

How can I avoid paying tax on my bonus?

Can I put all of my bonus into a 401(k)?

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3. Consider 529 Plan Contributions

4. Address Roll-Over Loose Ends

5. Review Insurance Policies

6. Review Your Estate Plan

7. Donate Appreciated Stocks

3 Things for Investors to Do by Tax Day 2026

1. Max Out IRA Contributions

2. Max Out HSA Contributions

3. Take Your RMD (if Applicable)

The Takeaway

How to Invest Your 401(k)

Assess Your Goals

Determine Your Risk Tolerance

Look at Diversification

Target-Date Funds

Factors to Consider

401(k) Investing: Things to Keep In Mind

Putting Everything into a Money Market Fund

Leaving Old 401(k)s Open

The Takeaway

FAQ

Can I invest my 401(k) on my own?

Is it possible to make my 401(k) grow faster?

Salary Reduction Contribution Plans Explained

How Salary Reduction Contribution Plans Work

Example of a Salary Reduction Contribution Plan

Pros & Cons of Salary Reduction Contribution Plans

Pros

Cons

Salary Reduction Contribution Limits

Salary Reduction Contribution Plan Withdrawal Rules

The Takeaway

FAQ

Does a 401(k) reduce salary?

What does employee salary reduction mean?

What is the difference between SEP and SARSEP?

What Is a Self-Directed 401(k) Account?

Who Is Eligible for a Self-Directed 401(k)?

How to Set Up a Self-Directed 401(k)

Pros and Cons of Self-Directed 401(k)s

Pros of Self-Directed 401(k) Plans

Cons of Self-Directed 401(k) Plans

How Much Money Can be Put in a Self-Directed IRA?

Common Self-Directed 401(k) Investments

Real Estate Investment Trusts (REITs)

Precious metals

Investments That Aren’t Allowed Under Self-Directed 401(k) Plan Rules

Real Estate With Family Ties

Loans

No Investment Benefit Beyond Asset Returns

The Takeaway

FAQ

What is the difference between an individual 401(k) and a self-directed 401(k)?

Can I roll my traditional 401(k) into a self-directed 401(k)?

How is a self-directed 401(k) taxed?

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