What is a 401k?
In simple terms, the 401k retirement plan is a trust in which employees are
allowed to contribute money before taxes are assessed. Some employers also
provide participants with matching funds to the employee's 401k account as part
of their benefits package. The employee may have the option of selecting
specific investment options for the money in their 401k account. Besides
building retirement funds, contributing to your 401k reduces your taxable income
and helps you keep more of your hard-earned money. 401ks are widely regarded as
an excellent financial tool and means of building your pension for retirement.
Who can participate?
If your employer offers a retirement plan that qualifies under 401k laws and you
are a full-time employee then you may participate.
How does it work?
Generally payments are auto-deducted from your pay check into your retirement
account. Your balance is invested according to the specifications made when you
joined the plan. If your employer provides matching funds, this part of your
account balance may not be available for some number of years after which it
becomes part of your vested balance.
Your 401k money is not taxed until you withdraw it, so if you've retired, you
will likely be in a lower tax bracket which results in less money going to the
tax man. Also your money grows faster though the power of tax-deferred
Since 401k contributions are typically made directly from your pay check, saving
for retirement is made easy. It is even possible to take out a loan against your 401k
account balance, and the best part is that any interest that you would be paying
on the loan won't go to a bank, it will be deposited into your account along
with the repaid principal. Be sure that you are prepared to leave the money in
your 401k retirement plan alone, since there is a 10% penalty for early
withdrawal and you will be liable for the deferred income taxes.
and 401k retirement
plan available for the following states in the USA:
Alabama - AL, Alaska - AK, Arizona - AZ, Arkansas - AR, California - CA,
Colorado - CO, Connecticut - CT, Delaware - DE, District of Columbia - DC,
Florida - FL, Georgia - GA, Hawaii - HI, Idaho - ID, Illinois - IL,
Indiana - IN, Iowa - IA, Kansas - KS, Kentucky - KY, Louisiana - LA, Maine
- ME, Maryland - MD, Massachusetts - MA, Michigan - MI, Minnesota - MN,
Mississippi - MS, Missouri - MO, Montana - MT, Nebraska - NE, Nevada - NV,
New Hampshire - NH, New Jersey - NJ, New Mexico - NM, New York - NY, North
Carolina - NC, North Dakota - ND, Ohio - OH, Oklahoma - OK, Oregon - OR,
Pennsylvania - PA, Rhode Island - RI, South Carolina - SC, South Dakota -
SD, Tennessee - TN, Texas - TX, Utah - UT, Vermont - VT, Virginia - VA,
Washington - WA, West Virginia - WV, Wisconsin - WI, Wyoming - WY.