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Definition of the Week: 401k
Investment Knowledge from stockbrokers.com
401k
What is a 401k?
A 401k is a type of retirement plan that is sponsored by an employer. This defined contribution plan allows the employee to have a portion of his or her salary paid directly, or deferred, into a 401k account. A 401k is intended to be used for retirement purposes, and the taxes on the plan are deferred until it is withdrawn.
StockBrokers.com Explains 401k
The 401k plan is the single most common type of defined contribution plan. It is named after a section of the Internal Revenue Code, which was created to help employees save money in a tax deferred manner. Many companies have begun matching a portion of the employees contribution, which has made the 401k plan an even more attractive option. It should be noted that funds in a 401k typically cannot be removed without a 10% penalty until after a person is at least 59 and a half years of age. There is a maximum limit on the total annual employee pre-tax contribution amount, which is currently set at $16,500.
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[...] situation, you should always keep retirement planning high on your financial priority list. The 401k account is one of the most widely used retirement accounts. There are plenty of benefits to using the 401k, [...]
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