What is a 401(k) Plan?
A 401(k) plan* (named after a section of the federal tax code) is an employer established plan somewhat similar to an Individual Retirement Account (IRA). Both plans are designed primarily as retirement savings plans. A 401(k) plan is generally funded with your before-tax salary contributions and, oftentimes, matching contributions from your employer. Your contributions, employer contributions (if any) and any growth in your 401(k) plan are tax-deferred until you withdraw the money. Once money is in your 401(k) plan, you generally cannot make withdrawals before age 59 1⁄2, except for special circumstances. Many employers, however, include loan provisions in their plans. Benefits from Investing in a 401(k) plan • Your contributions, any employer contributions, and any earnings on your 401(k) account grow tax-deferred; which means they are not taxed until they are withdrawn. Consequently, you have more dollars working for you, and your account balance may grow more quickly. • Your curren
A 401(k) plan is one of the most popular retirement plan benefits available today. Nearly 50% of all companies in the U.S. offer 401(k) plans to their employees. Nearly 40 million Americans entrust a big part of their future to their 401(k) plans. Why is it so popular? A 401(k) plan lets you reduce your taxable income and save money for retirement on a tax-deferred basis. Many employers match employee contributions at a rate of 10, 25, 50, and sometimes even 100 percent, which makes savings through a 401(k) plan pay off even before it begins to acquire investment earnings.
A 401(k) plan* (named after a section of the federal tax code) is an employer established plan somewhat similar to an Individual Retirement Account (IRA). Both plans are designed primarily as retirement savings plans. A 401(k) plan is generally funded with your before-tax salary contributions and, oftentimes, matching contributions from your employer. Your contributions, employer contributions (if any) and any growth in your 401(k) account are tax-deferred until you withdraw the money. Once money is in your 401(k), you generally cannot make withdrawals before age 59½, except for special circumstances. Many employers, however, include loan provisions in their plans. Benefits from Investing in a 401(k) plan • Your contributions, any employer contributions, and any earnings on your 401(k) account grow tax-deferred; which means they are not taxed until they are withdrawn. Consequently, you have more dollars working for you, and your account balance may grow more quickly. • Your current gro
A 401(k) plan is a type of qualified retirement plan. It is typically sponsored by a company, although there are various other entities such as schools and non-profit organizations that offer 401(k) plans to employees. A primary distinction of a 401(k) plan is that it offers to employees what is referred to as a salary deferral arrangement. A salary deferral is an amount of an employee’s salary that is deferred — that is to say tax deferred — until the employee withdraws the money from the plan. The benefit to the employee is that salary deferrals are contributed pretax. This not only lowers the employee’s taxable income, it potentially saves money for retirement tax-free during the working years when a person is generally in a higher tax bracket than that of the retirement years. In addition to the salary deferral feature, many 401(k) plans provide a matching contribution on part or all of an employee’s salary deferrals. There are various formulas that an employer may use for the matc
