5
Loans
Although the 401(k) Plan is intended to help feather
your nest for the future, you may borrow from your
account if funds are needed and the situation does not
qualify as a severe financial hardship. Taking a loan
may be a better option than taking a flat-out early
withdrawal, which will generally result in a 10% penalty
plus income tax on the amount you withdraw. Keep in
mind, however, that taking a loan may be costly and
may reduce the funds you ultimately have available at
retirement.
The most you can borrow from your account is 50% of
your vested account balance, not to exceed $50,000.
The minimum loan amount is $1,000. You pay the
money back into your account, plus interest, through
after-tax payroll deductions.
Any outstanding loan balances over the previous 12
months may reduce the amount you have available
to borrow in the future. You may have one loan
outstanding at a time. The cost to initiate a loan is $75
and there is a quarterly maintenance fee of $6.25.
How does your investment mix align with your retirement savings goals? Should you be more aggressive?
More balanced? More conservative? For answers, check out Fidelity’s portfolio review at
to find your target asset mix or complete the Investor Profile Questionnaire. After you log in, click on
Guidance & Retirement
at the top of your browser window. Next click on
Investment Guidance
then click
on
Portfolio Review
.
Tax Credit
You may be eligible to receive a federal tax credit
equal to 10%, 20% or 50% of your annual Petco 401(k)
contribution, up to $1,000 if you file a:
• Single tax return and have annual income of $28,250
or less; or a
• Joint tax return and have annual income of $56,500
or less.
For example, if you and your spouse had a combined
income of $32,000, filed a joint tax return, and together
contributed $4,000 ($2,000 each) to a 401(k) plan, you
would be eligible for a 50% tax credit. This means you
would pay $2,000 ($4,000 x 50%) less in income taxes
for the year.
Plan Withdrawals
Because 401(k) Plans are designed for retirement
savings, IRS regulations specify when you can receive
funds from the Plan. Before age 59
1
/
2
, you
may withdraw funds only if you:
• Terminate your employment
• Become permanently disabled
• Have a severe financial hardship
Any funds you receive before age 59
1
/
2
may be subject
to current income taxes and possibly a financial penalty.
If you leave Petco, you may avoid the financial penalty
and defer paying taxes on your distribution by rolling it
over into another employer’s qualified plan.
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