What Is A 401k?
Well this is a question that many of us askthemselves or their friends. Though it might be a simple question to ask you may soon find out that the answer is much more complicated than we initially thought. Some of your friends, especially the older ones probably know that a 401k is a retirement plan, but they might not be able to explain to you in detail. There are several retirement plans on the market and each of them has its advantages and disadvantages. 401k is a retirement savings plan financed by employee payments and similarto employers’ payments. The payments are taken from the grosswages and the amount of money one has in his or her retirement plan account are not getting taxed until they are withdrawn.
A more complete answer to the what is a 401k; question isone that can provide more details about the retirement plan. Eventhough not all 401k retirement plans are identical, they have to comply with the rules and regulations shaped by the US tax code. Each company offering its employees 401k sets the maximum percentage an employee can contribute to his or her 401k. The company will also add a certain percentage from the company’s resources. While the employee contributes with money, the employer can sometime contribute with stocks. Since the amount of money that goes into the retirement plan fund is taken from a gross salary, the tax paid by the employee is smaller.
