401k Age Requirements & Other Eligibility Rules

Companies aren’t legally obligated to offer a 401k plan to their employees. However, companies that do offer a 401k plan are legally obligated to fairly offer them to any employee who is at least 21 years of age and has provided at least one year of service at the company.

A frequently asked question is: How about if you’re under 21 years of age? Are you still eligible for a 401k?

In this guide, we’ll examine all the eligibility rules of a 401k plan, and what you’re legally entitled to if your company offers a retirement plan.

Basic 401k eligibility rules

You’re eligible for a 401k plan if:

These are the eligibility rules set by the IRS. However, depending on the company, the rules may be slightly different.

If you’ve worked at least a year at your company, or 1,000 hours at the company, they must offer you their 401k plan. However, some companies don’t have a time requirement and will allow all employees to participate in their 401k plan as soon as they begin their employment.

If you’re a part-time employee, your employer must offer you their 401k plan if you’ve provided at least 500 hours of service for three consecutive years.

If a company doesn’t have a 401k plan for employees, then they’re not legally obligated to offer you one. The rules apply only if the company has a 401k plan. They cannot discriminate and pick and choose who gets to participate and who doesn’t.

What if you’re under 21 years of age?

If you’re younger than 21 years of age, then companies aren’t legally obligated to enter you into their plan. However, some companies will still let employees under 21 participate in their plans. It entirely depends on the company policies.

Is there a minimum age requirement to contribute to a 401k?

There are no set age restrictions with a 401k set by the IRS. You are allowed to make contributions to a 401k plan regardless of your age.

However, you could be bound by other regulations like labor laws or age of majority rules that prevent minors from being employed full-time or signing a legal contract.

Age of majority rules could prevent you from entering into a legal contract if you’re under 18

The age of majority is the age in which you’re legally allowed to sign a legal contract. For most US states, the age of majority is 18 years of age. Therefore, if you’re under 18 years old, your state laws may prevent you from signing into a 401k plan with your employer.

Labor laws could prevent you from working if you’re under 14

In the US, labor laws like the Fair Labor Standards Act ensure that the minimum age of employment is 14 years old. So while the 401k plan doesn’t have any age requirements, due to labor laws, the minimum age to make contributions to a 401k is still 14 years of age.

401k alternatives for minors under 21

If you’re unable to contribute to a 401k plan at work because you’re too young, then you still have several other options. You can choose to contribute to a Roth IRA or traditional IRA at any age. IRA accounts can be opened by children of any age.

Is there a maximum age for 401k eligibility?

There is no maximum age for 401k eligibility. A company is not allowed to discriminate against age and prevent 401k plan participation based on being too old. As long as you have earned income at the company, you can participate in the plan.

RMD

Keep in mind, though, that a 401k plan has RMD rules. RMD stands for required minimum distributions. The IRS requires that you start making withdrawals from your 401k account once you reach the age of 73. So while you can still contribute to the plan, and receive employer matching contributions, you’ll have to make at least the minimum amount of required withdrawals each year.

You can check how much you need to withdraw based on your age using this RMD table.

Is there a minimum age for employer match contributions?

There are no age requirements for receiving employer matches. Instead, your eligibility to start receiving employer match contributions (if offered by your company) is usually dependent on hours of service. While some companies offer employer match participation immediately after employment, it’s more common to have to have worked at least one or two years before you’re eligible.

What is an employer match?

Some employers will choose to offer an employer match and make contributions into their employees’ 401k plans, up to a specified amount. Usually, the amount is determined as a fixed amount or as a percentage of your compensation. For employees, employer match contributions are almost considered as free money on top of their regular compensation. This is completely optional on the part of your employer, but many companies offer it as an incentive to attract high quality talent to work for them. For example, here are some of the highest employer matches offered by companies in the US.

Is there an age requirement for withdrawals?

Yes, to start taking qualified distributions from your 401k plan, you must reach the age of 59½. You are not required to make withdrawals until RMD kicks in at the age of 73, but you can start taking distributions without any penalties after you turn 59½ years of age. If you withdraw before the age 59½, you’ll be hit with a 10% early distribution penalty and income taxes on the amount withdrawn.

While there are no penalties for qualified distributions, you may have to pay income taxes depending on if your withdrawals are from a traditional 401k or a Roth 401k. Traditional 401k withdrawals get taxed as regular income. Roth 401k withdrawals are tax-free since you contributed with after-tax income.

Wrapping Up

If your company offers a 401k plan to employees, they’re obligated to start offering you their 401k if you’re at least 21 years of age, and have worked at least one year at the company, providing at least 1,000 hours of service. If you’re a part-time worker, you’re also eligible if you’ve provided at least 500 hours of service for three consecutive years.

If you’re under 21 years of age, a company isn’t legally obligated to offer you their 401k plan, but they could choose to do so. It’s entirely up to your employer.

State labor laws prevent full-time employment until you reach at least 14 years of age, and age of majority rules prevent people under 18 from entering into legal contracts. Each state has different laws, so if you’re under 18 years of age and want to participate in a 401k plan, check your state laws.

If you’re unable to participate in a 401k, you could contribute to an IRA instead, which has no age limits.

Do you own a business, side hustle, or freelance on the side? You might be eligible for a solo 401k. Learn more with the Solo 401k Handbook: Everything you need to know about a solo 401k in a handy PDF format.

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The Solo 401k Handbook

Everything you need to know in a handy ebook format.