Quiz: What Do You Know About IRAs and 401(k) Plans?

Since 2024, federal law has allowed 401(k) owners younger than 59½ to withdraw up to $1,000, penalty-free, for “unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses.” (You’ll still owe taxes on the money.) You can make one such withdrawal a year and can’t make another for the next three years unless you pay the money back.

Investment goals and strategies typically shift as you get closer to retirement. Generally, people put more of their retirement savings into stocks when they are younger to book in years of higher returns, then shift to less risky assets like bonds as they near retirement to safeguard their nest egg. But how much you leave in stocks may depend on your tolerance for the market's ups and downs.

The standard 401(k) contribution cap in 2025 is $23,500, but savers like Sally who are 50 or older can make additional “catch-up” contributions of up to $7,500, for a total of $31,000. Starting in 2025, 401(k) account holders ages 60 to 63 can make even bigger catch-up contributions — up to $11,250, for a maximum contribution of $34,250. 

Federal legislation passed in recent years requires employers who offer a workplace retirement plan to make it available to part-time staff who work at least 1,000 hours for one year or 500 hours for two consecutive years. 

If you have a traditional IRA or 401(k), you must take required minimum distributions (RMDs) annually starting at age 73. Roth IRAs and 401(k)s are not subject to RMDs while the original owner is alive but generally will be if the account is passed on to an heir.