25 FAQs About Your Amazon 401(k) [2025]
Understanding your Amazon retirement benefits is crucial for planning your financial future. In this comprehensive guide, we'll answer the most common questions about Amazon's 401(k) plan so you can make informed decisions about your long-term financial security.
Amazon 401(k) Basics
1. What retirement savings plans does Amazon offer?
Amazon offers a 401(k) plan administered by Fidelity Investments. This plan allows employees to contribute a portion of their salary to an investment account, where the funds can grow until retirement.
2. How much can I contribute to the Amazon 401(k)?
In 2025, you can contribute up to $23,500 to your Amazon 401(k) in either pre-tax or Roth contributions. If you're 50 or older, you can make an additional $7,500 in catch-up contributions, for a total of $31,000. These limits are set by the IRS and adjusted annually for inflation.
3. Am I eligible for the Amazon 401(k)?
All Amazon employees ages 18 or older are eligible for the 401(k) plan immediately upon their hire date. This is true for both full-time and part-time employees.
4. Does Amazon have a 401(k) employer match?
Amazon provides a 50% match on employee contributions up to 4% of eligible pay. This means that if you contribute at least 4% of your salary, Amazon will add an additional 2% to your 401(k) account. For example, if you earn $100,000 annually and contribute at least $4,000 (4%), Amazon will contribute an additional $2,000 (2%) to your account.
5. When do I become vested in Amazon's matching contributions?
Amazon uses a cliff vesting schedule, which means you become 100% vested in the company's matching contributions after three years of service, as long as you complete at least 1,000 hours of work in each of those years (3,000 total). If you leave Amazon before completing three years of service, you forfeit all employer matching contributions.
Amazon 401(k) Contribution Strategies
6. Are Amazon 401(k) contributions pre-tax or after-tax?
Amazon allows both traditional (pre-tax) and Roth (after-tax) contributions to your 401(k).
Pre-tax contributions reduce your current taxable income but are taxed when withdrawn in retirement. These may be better if you are in a high tax bracket now and expect to be in a lower bracket in retirement.
Roth contributions are made with after-tax dollars but grow tax-free and can be withdrawn tax-free in retirement if requirements are met. These may be better if you are in a lower tax bracket now than you expect to be in retirement.
Many employees benefit from having both types of contributions for tax diversification.
7. What is Amazon's mega backdoor Roth option?
Amazon's 401(k) plan includes the ability to make after-tax contributions beyond the standard pre-tax and Roth limits, then convert those contributions to Roth status. This strategy can significantly increase your tax-advantaged retirement savings, particularly for higher-income employees who have maxed out other retirement savings options.
8. How do I set up the mega backdoor Roth in my Amazon 401(k)?
To implement the mega backdoor Roth strategy, follow these steps:
First, max out your regular pre-tax and/or Roth contributions ($23,500 in 2025, or $31,000 if you're 50+).
Log in to your Fidelity NetBenefits account and set up after-tax contributions.
Change the conversion setting from the default "don't convert my after-tax to Roth" to "convert my after-tax to Roth.”
This final step ensures your after-tax contributions are automatically converted to Roth status, making future growth tax-free.
9. Can I contribute to both a 401(k) and an IRA while working at Amazon?
Yes, you can contribute to both an Amazon 401(k) and an individual retirement account (IRA). However, your ability to deduct traditional IRA contributions may be limited based on your income and participation in the employer plan. Roth IRA contributions are also subject to income limits. For 2025, the IRA contribution limit is $7,000 ($8,000 if you're 50 or older), regardless of how much you contribute to your 401(k).
10. How can I maximize my 401(k) benefits at Amazon?
To fully benefit from the Amazon 401(k), follow these tips:
Contribute at least 4% of your salary to receive the full employer match.
Consider contributing the maximum allowed for the current year.
If you're 50 or older, take advantage of catch-up contributions.
Consider diversifying between traditional and Roth contributions.
Explore the mega backdoor Roth option if you can contribute beyond the standard limits.
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Amazon 401(k) Investment Options
11. What investment options are available in the Amazon 401(k)?
Amazon's 401(k) plan, administered by Fidelity, offers more than 25 different investment options, including:
Target date funds (based on your expected retirement year)
Index funds that track major market benchmarks
Actively managed mutual funds
Amazon company stock
A BrokerageLink option for expanded investment choices
The plan includes options across various asset classes, allowing you to build a diversified portfolio based on your investment timeline and risk tolerance.
12. What is the BrokerageLink option in the Amazon 401(k)?
BrokerageLink is a self-directed brokerage option within the Amazon 401(k) that provides access to a wider range of investments beyond the standard plan offerings. Through BrokerageLink, you can invest in thousands of additional mutual funds, including specialty options like socially responsible/ESG funds and sector-specific funds.
This option is ideal for more experienced investors who want greater control over their retirement investments or those seeking specific types of investments not available in the standard lineup.
13. How should I allocate my investments in my Amazon 401(k)?
Your ideal asset allocation depends on factors like your age, your risk tolerance, and how many years you have until retirement. A common approach is to use the "100 minus age" rule to determine stock allocation. For example, if you're 30 years old, you might consider investing roughly 70% in stocks and 30% in bonds. As you approach retirement, you'd gradually shift to a more conservative allocation.
For simplicity, many Amazon employees choose target date funds, which automatically adjust to become more conservative as you near retirement.
14. Should I invest in Amazon stock within my 401(k)?
While investing in Amazon stock can provide growth potential, it's generally advisable to limit company stock to no more than 10%–15% of your retirement portfolio. This helps protect against concentration risk, as your financial well-being is already tied to Amazon through your employment, salary, and potentially RSUs.
Withdrawing Funds from Your Amazon 401(k)
15. When can I start withdrawing money from my Amazon 401(k)?
You can begin taking withdrawals from your Amazon 401(k) at age 59½. Making withdrawals before that will result in a 10% early withdrawal penalty. However, there are exceptions, including hardship withdrawals, loans, and the rule of 55.
16. What is the rule of 55 at Amazon?
If you retire from Amazon at 55 or older, you can start making withdrawals from your 401(k) without the usual penalties. This is known as the rule of 55. The IRS provides this exception to early withdrawal penalties to make early retirement practical for more employees.
17. What are the hardship withdrawal options for the Amazon 401(k)?
Amazon's 401(k) plan allows hardship withdrawals for immediate and heavy financial needs, including:
Medical expenses for you, your spouse, or your dependents
Costs to prevent eviction or foreclosure on your primary residence
College tuition and related educational expenses
Funeral expenses
Certain costs for repairing damage to your primary residence
Hardship withdrawals are subject to income taxes (unless the contributions were made on a Roth basis). Unlike loans, hardship withdrawals cannot be repaid to your account.
18. Can I take a loan from my Amazon 401(k)?
Yes, the Amazon 401(k) plan allows loans. However, taking a loan reduces the amount invested for retirement and may impact long-term growth. If you must take a loan, repayments will be made through automatic payroll deductions, typically over a period of five years, or longer in the case of a loan taken to buy a house.
19. Does the Amazon 401(k) have RMDs?
Once you reach age 73, you'll have to take required minimum distributions (RMDs) from your traditional (pre-tax) 401(k) balance. 401(k) contributions that are made on a Roth basis are exempt from RMDs while you're alive.
20. How are Amazon 401(k) withdrawals taxed in retirement?
Taxation of 401(k) withdrawals depends on the type of contributions:
Traditional (pre-tax) contributions: Withdrawals are taxed as ordinary income in the year you take them.
Roth contributions: Qualified withdrawals (after age 59½ and account held for at least five years) are completely tax-free.
After-tax contributions that were converted to Roth: Growth is tax-free for qualified withdrawals.
Tax planning for retirement withdrawals can significantly impact your retirement income, so consider consulting with a tax professional.
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Retirement and Beyond
21. What happens to my Amazon 401(k) if I leave the company?
If you leave Amazon, you have several options for your 401(k):
Keep your money in the Amazon 401(k) plan (if your balance exceeds $5,000)
Roll over your balance to an IRA (which may provide more investment options and flexibility)
Roll over your balance to a new employer's 401(k) plan
Take a cash distribution (subject to taxes and potentially a 10% early withdrawal penalty depending on your age)
Which option is best? That will vary based on your finances and plans for the future. A fiduciary financial advisor can help you make the right choice for your unique situation.
22. What happens to my Amazon 401(k) if I become disabled?
If you become disabled, you may be eligible to take distributions from your Amazon 401(k) without the 10% early withdrawal penalty that typically applies to withdrawals before age 59½. To qualify, your disability must meet the IRS definition of disability, which generally means you are unable to engage in substantial gainful activity due to a physical or mental impairment that is expected to last for an extended period.
23. What happens to my Amazon 401(k) if I pass away?
If you pass away, your Amazon 401(k) will be distributed to your designated beneficiaries. The distribution options and tax implications depend on your beneficiary's relationship to you and the type of account (traditional or Roth). This makes it crucial to keep your beneficiary designations up to date.
Spouses have the most flexibility with inherited 401(k) assets, including the option to roll them into their own retirement accounts.
24. How does the Amazon 401(k) benefits coordinate with Social Security benefits?
Your Amazon 401(k) and Social Security benefits work independently, with each providing an important component of your retirement income. 401(k) withdrawals do not directly reduce your Social Security benefits. However, 401(k) withdrawals are considered income and may cause a portion of your Social Security benefits to become taxable if your combined income exceeds certain thresholds.
25. How can I ensure my Amazon 401(k) is on track for retirement?
Determining if your 401(k) is on track requires evaluating your retirement income needs and analyzing your current savings trajectory. Financial advisors typically recommend saving at least 15% of your income (including Amazon's match) throughout your career and aiming for a retirement portfolio of 8–10 times your final salary by retirement age.
However, every employee's situation is unique, and a one-size-fits-all approach rarely leads to the best results. A fiduciary financial advisor can provide personalized guidance on your retirement strategy, ensuring you're making the most of your Amazon benefits while staying on track to meet your long-term financial goals.
Get Help from the TrueWealth Team
At TrueWealth Financial Partners, we specialize in helping professionals like you optimize their retirement benefits. Our advisors understand the nuances of Amazon's compensation and benefits structure, allowing us to provide tailored guidance for your specific situation.
We can help you:
Determine if your current 401(k) strategy is aligned with your retirement goals
Make the best investments based on your risk tolerance and timeline
Implement tax-efficient strategies like the mega backdoor Roth
Develop a comprehensive retirement strategy
Navigate the transition to retirement when the time comes
Ready to take the next step to a better future? Schedule a free consultation with TrueWealth today, and we can start building the perfect retirement plan for you.
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