what is 401(K) benefit?

Question

It is related to salary package.
Example; Benefits includes medical, dental, etc........................,as well as 401(K) with company match

Answer 1

A 401(k) is a type of retirement account. The employee contributes a portion of his/her salary and the employer matches a part of that. The employee selects how the contributions are invested (depending on the investments offered in the 401(k) plan). The money invested in the account isn't taxed until withdrawals are taken, generally after the age of 59 and a half.

Answer 2

A 401(k) is a type of savings account where you save money for retirement.

You have money deducted from your gross pay each pay period or each month (depends on the company), and that money goes into a special fund. The fact that the company matches means that if you put in 4%, they will also contribute 4%. Most companies match up to a certain number, like 6%, which means that if you were to contribute 4%, 10% of your pay would go into that account each pay period; if you contributed 10%, your total contribution would be 16% with the company match.

The funds are invested in mutual funds, stocks, and other long-term investments, and usually you get to pick what percentage of your money goes where. People who have a long time until they retire are usually encouraged to invest differently than people who have only a short time until they retire.

You can take money out of your 401(k) for emergencies, but you usually pay penalties, so it's best to plan on not touching that money until you retire. Also, there are benefits during tax time for Americans when they are paying their personal income taxes.

It is an excellent way to put away money for retirement, especially if the company matches funds in any way. That means they are basically giving you money toward retirement. It's also helpful for those who have a hard time saving money on their own. Because you never actually get the money, there is no temptation to spend it--it just goes right into the savings account.

Hope this helped explain a little.

Answer 3

Human Resources usually goes over a benefits package with new people that have just been hired. Part of your benefits are as you say, medical, dental, vision insurances, and many times companies offer a 401K. It is a retirement fund that allows the company to take deductions out of your paycheck, in which you indicate in the paper work that your are given, the amount you want deducted. Most companies will ask you what percentage from your annual salary you would like deducted and they will match either 50%, some as high as 75% match of what you put in. In other words if you put in $100 every payroll period and they offer a 50% match, they would put in $50. Most companies will match up to 6% of your annual income. The money is taken out of your payroll pre-tax. So it is taken out before your state and federal taxes are removed from your paycheck, so you are not taxed on that money that you are saving for retirement. It is not like a bank account that you can withdraw. There is a penalty payment for withdrawing, although in extreme financial circumstances you can get a loan from your 401K account, although you would pay for doing this. Read over the material and the worksheet that is given to you. Many times the worksheet will factor in your age, how much time you have to save before retirement and it will aid you in determining the amount to withdraw in accordance with how much you earn. These funds that go into your retirement account are most often diversified and that allows you to choose how you want the funds to be split for best earning power. You may choose bonds that are conservative growth, or large cap stocks, and small cap stocks. The best thing would be to choose an amount that you can best afford and pick diversification of funds that give you a balance to allow growth but not huge risk. Riskier would be to put all your funds into large cap stocks for instance. If you diversified with balance it would be to pick some bonds, small cap stocks, mutual funds, and large cap stocks. Usually you can go online to the company that will be dealing with your porfolio and find out how each of the funds have prospered in the past several years, so you have a better idea of how the growth rate is for each, and the risk involved. Take the time to educate yourself about it! You'll be glad when you're older that you started so young. If you should leave the company, you can then roll your 401K into an IRA account so you do not lose your investment. An IRA is just another retirement account that will be under your name, instead of the company you work for and there would not be a match, just your own deposits that you can build with. Good luck!

Answer 4

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What is a 401k?


A 401k is an employer sponsored retirement plan and is grouped into two categories-defined benefit and defined contribution. With a defined benefit plan, the employer promises to pay a defined amount to retirees who meet certain eligibility criteria. With a defined contribution plan, the plan defines the contributions that an employer can make and not the benefit that the employee will receive at retirement.

A defined benefit plan usually links the benefit to the amount of service and is based on the final average salary. Employees can usually predict the monthly retirement income they might receive with this type of plan and might also be given the choice of a lump-sum benefit at retirement.

A defined contribution plan is not a defined benefit so the employee cannot predict a monthly retirement income. If an employee leaves the company, they usually receive the proceeds in a current or deferred lump sum or annuity.

Companies are prohibited by law from tapping into the money in their 401k. But if your company goes bankrupt and you have 401k money invested in their stock fund you will likely lose that money

How does a 401K work?


If your company offers a 401k retirement plan, you are given the option of selecting the funds you choose to invest in from a list of funds provided in the 401k. Your company will provide you with a list of the funds they use for their plan and give you the opportunity to decide which you want to invest in and the percentage to invest. Your employee contribution will automatically be deducted from your pay check before taxes.

Each employee can contribute up to a certain percentage of their pay into a 401k and some employers will match a percentage of your contributions. Your contributions along with any matched contributions are then invested into your selected funds. These funds will grow without being taxed and can be withdrawn when you reach the age 59 ½. At this time, you must pay income tax on the withdrawn funds. There are ways you can withdraw your funds before reaching the age 59 ½ but these withdrawals usually require a penalty along with payment of taxes.


What can I do to repair my declining 401k balance?


The first thing you might do is to look closely at how you are investing. If you're investing heavily in your employer's company stock, you should reduce this amount and diversify your investments. Adjust your contributions to make the most of the new contribution limits. Each year you can contribute the maximum tax-deferred amount to your 401k. Your age and your company's plan policy will be deciding factors in your strategy in repairing your 401k balance. Younger persons will have longer to rebuild their retirement plan than those who are 50 or over.

How should a 401k be balanced?

According to Money magazine, the suggested allocations at three life stages are:

Aggressive--for those with 35 or more years until retirement


50%--large cap stocks

15%--mid cap stocks

15%--bonds

10%--small cap stocks

10%--international stocks

Moderate--for those with 20 years until retirement


35%--large cap stocks

35%--bonds

10%--mid cap stocks

10%--small cap stocks

10%--international stocks

Conservative--for those within 10 years of retirement


40%--bonds

30%--large cap stocks

10%--mid cap stocks

10%--international stocks

10%--cash


401k plans are very popular and an excellent way to plan for your retirement. As with any other investment, you do need to carefully watch your portfolio and make wise investment choices.

Answer 5

401k is a tax shelter where you can save money for retirement. You can take a percentage of your income and allocate it to your 401k. This deduction is taken before taxes are taken out so you pay less taxes for the year. Some companies match a certain percentage of your contribution (ex: they match 50 cents on every dollar you put in up to $3000). This contribution can be subject to vesting over 0-5 years depending on the company but the earning on the match is yours right from the start.

Answer 6

A 401(k) benefit is a retirement plan where the employer matches what you put in to it by percentage, something like 5% of every set amount that you deposit into the plan.

Answer 7

Short answer: it's good, not only is it good for you in terms of saving money for the future, it means that the company is a good company to work for as 401s are not offered everywhere anymore.

Answer 8

It is a retirement plan that you have with the company that you work for, you pay some into it and the company pays some into it.

Answer 9

http://en.wikipedia.org/wiki/401(k)