A Roth 401(k) is an employer-sponsored retirement savings plan that combines features of a traditional 401(k) and a Roth IRA. Employees contribute after-tax dollars (i.e., income taxes are paid before money goes in), and qualified withdrawals in retirement are tax-free — including both contributions and earnings, as long as certain conditions are met.
To make tax-free withdrawals from a Roth 401(k), you must:
Be at least 59½ years old
Have held the account for at least 5 years
Roth 401(k) vs. Traditional 401(k): Key Differences
Feature
Traditional 401(k)
Roth 401(k)
Contributions
Pre-tax (lower your taxable income now)
After-tax (no immediate tax deduction)
Tax on Withdrawals
Taxed as ordinary income in retirement
Tax-free if qualified (age 59½ + 5-year rule)
Impact on Take-Home Pay
Lower, because you’re deferring taxes
Higher, because taxes are paid upfront
Required Minimum Distributions (RMDs)
✅ Yes, starting at age 73 (unless rolled into IRA)
✅ Yes, starting at age 73 (but can avoid if rolled into Roth IRA)
Best For
Those expecting lower income/tax rate in retirement
Those expecting higher income/tax rate in retirement
Hardship withdrawals from a 401(k) are early distributions taken due to an immediate and heavy financial need. They allow participants to access funds without permanently terminating employment, but they come with strict rules and consequences. Here's a concise breakdown:
Key Points:
Eligibility: Must show an “immediate and heavy” financial need that cannot be met through other resources.
Permitted Uses (examples): Medical expenses, Funeral costs, Tuition and educational fees, Payments to prevent foreclosure or eviction, Repair of damage to a primary residence, Purchase of a principal residence.
Tax Consequences:
Subject to ordinary income tax
May incur a 10% early withdrawal penalty if under age 59½ (unless an exception applies)
Withdrawal Limits:
Typically limited to the amount necessary to satisfy the need, including taxes and penalties.
Documentation Required:
Must demonstrate the need and confirm no alternative financial means are available.
No Repayment Option:
Unlike a 401(k) loan, hardship withdrawals do not get repaid—once withdrawn, that money is permanently removed from your retirement account.
Not all business valuations are created equal. Whether you're planning for retirement, transferring ownership to family, preparing for a sale, or securing a loan, the type of valuation you need depends entirely on its purpose. Understanding the different valuation types is critical for both protecting your interests and making smart, informed decisions about the future of your business.
At a high level, business valuations fall into two main categories: Tax Valuations and Non-Tax Valuations. Tax valuations are formal, credentialed appraisals designed to meet strict IRS and legal standards. You’ll typically need one if your situation involves estate planning, shareholder transactions, or tax reporting. These reports provide what's called a “conclusion of value” – a definitive, well-supported statement of your business’s worth.
Non-tax valuations, on the other hand, are designed to give business owners and management practical, strategic insights. Whether you’re planning for growth, getting ready to sell, or mapping out succession, these flexible engagements often produce a “calculation of value” – an analysis that’s tailored to your specific goals without excessive formalities.
Choosing the right type of valuation ensures the outcome fits the intended purpose and helps you make decisions with confidence.
An Employee Stock Ownership Plan (ESOP) is a retirement benefit plan that allows employees to become beneficial owners of stock in the company they work for. Here are the key features:
Retirement Plan Structure: ESOPs are qualified retirement plans, regulated under ERISA (Employee Retirement Income Security Act), and are often used as an employee benefit similar to a 401(k).
Ownership & Motivation: Shares are held in a trust for employees, and ownership typically grows over time. This structure is designed to align employee interests with the company's success, promoting productivity and retention.
No Upfront Cost to Employees: Employees typically do not buy the shares themselves; instead, the company contributes stock or cash to purchase stock on behalf of the employees.
Exit Strategy for Owners: ESOPs can also be used as a succession or exit planning tool for business owners, allowing them to sell part or all of the company to employees while preserving the legacy and culture.
Tax Advantages: ESOPs offer significant tax benefits to both the company and selling shareholders, particularly in C corporations, where the seller may defer capital gains taxes under certain conditions.
In essence, ESOPs are a way to transfer ownership to employees over time, creating a more engaged workforce while offering a tax-efficient solution for business continuity.
