Main Menu
Articles Home
Most Popular Articles
Top Authors
Submit Articles
Submission Guidelines
Link to Us
Bookmark
Contact Us



Partners
 
Home / Finance

What Is A 401(K) Plan?

By:Henry Clark


The 401(k) retirement plan is funded by employee contribution and a matching employer contribution. The major feature of the plan is that the contributions are taken from pre-taxed salary. The fund accumulates tax-free until it is withdrawn. Most businesses and tax-exempt organizations can create these retirement plans.



The 401(k) takes its name from the IRC (Internal Revenue Code) of 1978. The operation of the 401(k) is administered by the EBSA (Employee Benefits Security Administration) of the Department of Labor.



The 401(k) plan has a lot of advantages. First and foremost is that the employee can contribute pre-tax money that reduces the tax paid in each paycheck. Also, the company contribution and any growth in the fund is free of tax until withdrawn.



The compounding of the fund during a 20 to 30 year period is quite amazing. The employee has a lot of control in the direction of the future contributions. When the company matches your contributions, it adds something extra on top of your own money. All money in the plan can be moved from one company to another unlike pension.



The 401(k) plan is protected by pension laws since it is a personal investment plan. It includes protection from garnishment by creditors but not from domestic cases that include child support.



There are some disadvantages in the 401(k) plan, it is hard to get your 401(k) contributions before age 60 (59 1/2 to be exact). The 401(k) is not insured by the PBGC (Pension Benefit Guaranty Corp). Also, the company contributions do not kick in until a certain number of years of service have been given. The rules state that company matching contributions must either be a 3 year 'cliff' plan (100 percent after 3 years) or a 6-year 'graded' plan.



Employees participating in a 401(k) plan have many options for investment. In most cases a listing of mutual funds. The mutual funds usually include money market fund, treasuries, stock funds and bond funds. Some plans may include investing in company stock and US Savings Bonds. The employee gets to choose how the savings is invested. The employee can also choose at any time to stop contributions.



Financial advisers usually say that the average 401(k) contributor is non-aggressive in terms of their investment options. Stocks have historically outperformed other types of investment, since the 401(k) is a long term investment it should be able to minimize the stock fluctuations.



Digg del.icio.us Blink Stumble Spurl Reddit Netscape Furl

Article keywords: retirement, investment, 401k financial, stocks

Article Source: http://www.articles2k.com

Henry Clark can show you how to make the most of your retirement years. Visit his website and learn more www.push-button-online-income.com/retirement









Top Finance Articles
  • 1). Locate And Find Debtors With A Credit Collection Agency  By : Stu Pearson
    It can be a frustrating experience trying to collect a debt from a customer who just seems unwilling to pay. Letters sent to their address go ignored, and phone calls are answered with empty promises of payment. While this is certainly a bad scenario, what if a customer who owes you money just disappears? It is possible to locate and find debtors with a credit collection agency, and in this article we’ll explain to you the methods behind their tracking.

  • 4). Who Is Responsible For Closing Costs  By : Raynor
    Buying or selling a home is a euphoric experience for both of the parties involved. This euphoria can cool when you learn which party is responsible for the closing costs. Who Is Responsible For Closing Costs When looking to buy or sell a home, every person eventually arrives at the question of funding closing costs on the transaction. To put it simply, both buyers and sellers typically are responsible for some of the closing costs.

  • 5). Family Finance  By : Joseph Kenny
    One of the hardest things that young couples report during their first year of marriage is getting to grips with joint finances. While most are willing to share what they have with their partner, they are not sure on the best way to bring this sharing into effect so that they can share with their new partner, but at the same time maintain financial security and a degree of independence.

  • 6). Preparing Your Finances For A Bird Flu Pandemic  By : Pandemic Zone
    If you have been paying attention to the news lately you may of heard of the threat of bird flu and a world pandemic. What would this mean and how would it affect your financial holdings. The World Bank, which has estimated that a bird flu pandemic lasting a year could, cost the global economy up to $800 billion dollars. The economic toll on the world economy will be catastrophic.

  • 8). High Gas Prices and Ways to Save  By : essmeier
    With Memorial Day around the corner, the great American travel season is here. During the summer, most Americans take at least one extended vacation, and four fifths take that trip by automobile. Unfortunately, this year, the price of gas is at record highs, and no one likes to spend their vacation money on gasoline. While there is little to be done about the price of gas itself, there are some things the average vacationer can do to help ease the costs of auto travel.


New Finance Articles
  • 1). How To Earn Money Online In Five Easy Steps  By : John Morris
    Living in Los Angeles, Greg realized that there are a lot of people who work from home rather than the office. One reason is that many of these executives are writers and producers of films and television shows...

  • 2). You Can Stick to Your Budget  By : Jonathon Hardcastle
    Recent studies have shown that Americans are spending less money on necessities than ever before. Yet, more Americans are also in debt. The unspoken fact that makes both those statements true is that Americans are spending more and more money on luxury items.

  • 3). Technical Analysis Of Stock Data  By : John Morris
    To perform a technical analysis is simply examining stock chart data in order to make predictions about the future of that stock. Investors who use this style of analysis are often unconcerned about the nature or value of the companies they trade stocks in...

  • 4). Getting The Most Money Out Of Selling Your House  By : John Morris
    It is easier said than done to make a profit in the real estate market nowadays. Those that manage to consistently turn a profit on real estate investments have been working in that field for years and are using proven strategies in order to minimize risk...

  • 10). How Can I Be Approved For A Low Rate Credit Card?  By : Mike Singh
    When applying for a credit card you may come upon what is called a low rate credit card, what is this exactly and how can it help you? First of all you should know that a low rate credit card is usually an excellent way to go when applying for a credit card. Find out more...



 


© 2006 articles2k.com - Privacy Policy