New answer on: Is A 401K Considered A Retirement Plan?

By: Jim Winkler

Jim Winkler — Thu, 26 Jun 2014 20:18:27 +0000

That is a great question! In the technical sense, yes, 401k's are a retirement plan. They were not originally designed to be the primary retirement vehicle though. Originally, they were designed to compliment the pension, or company retirement plan that you would receive from your employer. As time has passed, less and less companies offer pension plans, and turned to 401k's as a way to offer a retirement option while not having the risk of paying you after you retire. They contribute a certain amount, but the risk of losses is strictly yours. As a result, many folks have seen their retirement funds disappear when the market has fared poorly. A 401k can be a valuable part of your retirement plan, but should not be the entirety of it. Please contact me, if you would like more details, okay? Thanks for asking!

By: David Pipes

David Pipes — Thu, 26 Jun 2014 18:11:10 +0000

There are two basic forms of retirement plans. Defined benefit plans are plans where the participants do not have separate accounts and the retirement benefit is computed based upon a formula of several factors such as age, years of service and highest salary. A Defined contribution plan is a plan where the participant can contribute an amount into a plan where each employee has a separate account. This is what a 401 K plan is. The return on the plan is based upon the performance of the underlying investment and nothing is guaranteed.

By: David Racich

David Racich — Tue, 28 May 2013 03:05:02 +0000

It is not only a retirement plan, but a qualified retirement plan under ERISA, The contributions are tax deductible. The accumulations of the plan are tax deferred. The distributions are fully taxable with no basis. And 401k distributions will also be included in the provisional income test to calculate whether Social Security benefits are taxed.

By: Larry Gilmore

Larry Gilmore — Thu, 23 May 2013 14:50:10 +0000

Is a 401k considered a retirement plan? Unfortunately, yes. Today 401(k)s are considered to be retirement "plans" rather than retirement supplement plans that they were intended to be when enacted in the early 80's. The orginal intent behind 401(k)s was to provide employees with an addtional way to set wages aside for retirement. Somewhere along the way since they were introduced, they became "primary" retirement plans, shifting the risk of outcome from employer to employee.

By: Jerry Vanderzanden, CLU, ChFC

Jerry Vanderzanden, CLU, ChFC — Thu, 23 May 2013 13:35:41 +0000

Yes. It is an employer sponsored, defined contribution plan under section 401(k) of the tax code. They were introduced around 1980 as an alternative to defined benefit pension plans. They have become popular but have had their critics especially during the financial crisis when some referred to them as 201(k) over market losses.