Home » Finance » Investing

All About 401(k) Plans

Apr 10, 2008
401(k) plans are retirement plans setup by employers in the United States to take advantage of income tax deferment that is available. The money is put directly into the plan from wages earned by the employee. The plan is tax deferred, not tax exempt. That is, income tax must be paid on the whole amount when the employee retires and begins drawing on the plan.

Many employers will match funds deposited by their employees into the 401(k) plan - this is a great benefit that will give an immediate return of 100% at least up to the amount the employer matches. Most employers set a limit as to how much of the deposit they will match. However, matching funds is one of the best features of many 401(k) plans.

Managing the 401(k) Plan

There are a couple of ways that the funds in a 401(k) plans are usually managed. The first, and most popular, is the employee directed. Here the employee is given a list of potential investments and is allowed to allocate and transfer the funds between the investment options available. The second is where there is a manager or trustee of the plan who makes all the investment decisions.

Withdrawing the Funds

One of the big problems with 401(k) plans is the restriction on what can be done with the funds before the employee retires. Usually there are very stringent requirements that must be met before an employee would be allowed to withdraw the funds early. And, the federal government imposes a 10% tax penalty on top of the normal income tax that would be due if the employee takes the money early.

One option to get access to some of the money from a 401(k) plan early is to take out a loan from the plan. Some plans allow low interest loans from the plan under certain circumstances. Nevertheless is best if employees only contribute as much to the 401(k) as they can afford.

Transfers

With todays workforce being so mobile, it is unusual for an employee to work for one employer for a whole career. 401(k) plans allow for moving to another job, though. The plan can be transferred to an individual retirement account or can be moved straight to the new employer's plan if the new employer has a 401(k) plan.
About the Author
Learn details about saving and investing for retirement and get free market timing signals and information at Free ETF Timing Signals
Rating:
Please Rate:
(Average: Not rated)
Views: 186
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Buying
    • Selling
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources