What Is A 401 K Retirement Plan?

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    David RacichPRO
    Fountain Hills, Arizona
    A 401 K Retirement Plan is a qualified ERISA plan that allows employers to offer their W2 employees a salary reduction by pretax contribution.  Employers offering a 401(k) plan may also offer matching contributions to the plan participants.  The earnings accrue on a tax-deferred basis, but are tax at ordinary income rates at distributions. Those distributions will also be included in the provisional income test for Social Security Benefit taxation. 

    Answered on June 7, 2013
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    Jeff Davis
    Insurance Advisor, Lordship Insurance Services, California
    401K plans have been one of the primary ways people who work save for retirement. It is what is known as a qualified plan meaning that it is subject to government enforced rules and regulations regarding how money goes into it, how much can go in, how it comes out and how much at one time. Employers offer these plans and agree to put in a certain amount (in some cases, not all) so that an employee can grow their nest egg while working. The funds grow tax deferred (no taxes due till funds are distributed to employee), typically have options as to where you will invest them and traditionally accumulate over time. You can ask your employer about their 401K plan if they offer one. You usually have to work with them for a few months or a year before you beome eligible to join.
    Answered on June 8, 2013
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