What Is a 401(K)?
If you work at a corporation of any size, you may find that a 401(K) plan is a part of your benefits package. For many people, the details of this savings option seem confusing, especially if they have never before dealt with one. Learning more about the possibilities and benefits of this tax sheltered savings and investment account. Making the most of both the tax savings and employer contributions can improve your overall financial outlook in the long term.
In the simplest terms, this plan is a tax shelter. You make contributions before taxes and they are made directly during the payroll process. The account, named for its section and paragraph in the IRS tax codes, serves as a vehicle for retirement savings. The funds in the account will then be invested by a plan manager, but you may have some amount of control over how the funds are invested, typically in terms of the amount of risk you are willing to take with your money. The specifics of your control of your money may vary depending on your company’s policies, who they invest with and more. Learning about the investment choices associated with your retirement savings will allow you to make smart choices. Younger employees may accept more risk than older ones.