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If you're like most workers, you may be eligible to participate in a defined–contribution plan such as a 401(k). If you're an eligible worker, you can set aside a part of your income, before taxes which then accumulates tax-deferred. That means you're making money, tax-free, for now, without doing much beyond setting it aside. Don't forget, distributions from most contribution plans are taxed as ordinary income and may be subject to a 10% federal income tax penalty if taken before 59½. Generally, once you reach age 72, you must begin taking required minimum distributions.