Can you explain to me about 401k (in plain English)no fancy big words..thanks?

Answer 1

its a retirement savings account, most companies will match your cotributions up to a certain amount. So when you put in what they match you are automaticly doubling your money. You can only pull it out without penalty until you retire. Until that time it is invested and interest. You can start pulling out money at age 59 and a half.

Answer 2

In agreement with Martinamag.... All companies have there own 401K program. In English and will use my company as an example. A 401K is a retirement savings account basically. It's just like an IRA and you can take out the money with no penalties once you reach a certain age which the company determines. My company is the age of 65. Most companies is usually 70 1/2. The company selects who the financial institution will be. We use Fidelity Investments and allow our employee's to select which fund they want to invest in (we offer 7 options.) There is also a cap meaning we allow our employee's to invest only upwards of 10% of there salary. We also have a matching plan. This means we will give the employee $0.50 cents for every dollar they invest. But here is the catch with matching 401K plans. There is what's called a vesting period. That means in order for you to receive the money the company has put into your account you have to be at the company a certain amount of time. At my company you have to be employed a minimum of 2 years to receive 100% of the money the company invested. Most companies it is usally 6 years which is totally not worth it. Who stays anywhere for 6 years these days? If the 401K your company is offering not a matching plan forget it. Don't waste your time. You can do your own retirement savings account (again like an IRA). If they do have a matching plan you need to find out how long is the vesting period. How long do you have to be at the company before you become eligible to receive the money the company will put into your account. Then once you leave the company for whatever reason you will have to roll over the money into another account. This could be another 401K if your new place of work offers it or you open up your own account to avoid paying any penalties and taxes on that money.

Answer 3

Let me try.

A 401k is a retirement account. It is best to save something (even if you are only 18 or 20) as early as possible, because it will grow that much faster.

Usually, your company will contract with a financial firm to control/run a 401k plan. Also, you company probably matches a certain amount. They all say it a bit differently. For example, some say they will match 1/2% up to 6%. So if you elect to put 6% of your salary into a 401k each and every paycheck, they'll put in an additional 3% for nothing. It's free money, so you should always put in that as a minimum.

So, the financial company has a bunch of options for you to put your money in. Research them and choose how you are going to allocate your money. If you put $100 away each biweek, and you pick 4 funds that you love, you would put 25% into each fund, so $25 each paycheck.

So over time, your 401k grows and grows. The money that is put in from your paycheck is before tax....so technically you have not paid any tax on it yet. Once you retire, you can take it out and use it for expenses, but you will pay some tax at that point.

Also, it is best not to touch your 401k ever...but some plans allow for you to take a loan out on your 401k. But you'll have to pay yourself back within the allotted time.

Finally, if leave your job, you can do several things with the money: roll into an IRA, roll into your next job's 401k plan (both have no penalty), just take it out (pay a penalty), or leave it there with your old company (if it is enough money).

Hope this helps!

Answer 4

You decide to take a certain percentage from your paycheck before or after taxes are taken out. Your company usually matches the amount by 50% or less. Example: You make 800 before tax, you contribute 10% which is 80$ Your company matches 40$. This is invested in their choice usually of mutual funds and/or stocks/ dividends etc...... There is a catch, not matter how much money you put in, you are not allowed to take any out until you are retirement age. You can usually take out a loan on that amount though that you have to pay back at the going rate. Also, if you do lose your job and need to take your savings out even if you are not retirement age that is allowed but you will be heavily taxed if before taxes funds 30% if after you will still have to pay at least 10% of your total saved. Also, remember that even though your company has been "matching" your amounts with their contributions, you are not full "vested" until 5 years of working there which means in plain English, that they keep all the money they have put in the account for you if you do not stay with the company for more then 5 years. A sad American economic fact, when they stopped giving people pensions.

Answer 5

Money is taken out of your check and put in a special account. The money fairy sprinkles it with growth powder and it slowly grows over time. If you even think about touching that money before you're old, the fairy casts an evil spell called IRS and most of the money will be forever lost. If you let the fairy do her job, when you are old, you will get to go to a magical place where you don't have to work but will likely want to wear sweaters in the summer and feed pigeons.

Sorry, I got carried away. Besides, you already have some great answers.

Answer 6

You have many answers posted here in response to your question to your question. If you look at it one way, NONE of them are correct. If you look at it another way, ALL of them are correct.

EVERY business writes its own 401k program. They are all different. None of them one are the same. Some put money in and in all different increments and some do not contribute in any way. They all have different critera you can withdraw money as in a personal loan if needed. Some companies you can join at your start date with the company and some you have to be with the company a year before you can participate.

SO! You need to talk to your employer and find out WHICH plan they offer.

Answer 7

One thing that has not been mentioned is you can pick the level of risk you are comfortable with. You can choose funds that have very little risk, some with medium risk and some with high risk.

Your employer will have a designated number of funds to choose from and they are usually identified as being low risk (i.e. bonds) medium risk (growth/balanced funds) and high risk (i.e. international funds)

A general rule of thumb is that if you have a long time before you retire, you can take more risks by going with the more aggressive funds (as long as you're comfortable with that). If there is a short time before you retire, it's best to be a bit more conservative and go with the low risk options.

Answer 8

a 401k is a retirement account. Basically, from your paycheck you can put money aside into an account (pre-taxes) allowing it to grow in different types of funds, however you set it up, for retirement. Once you turn 70 1/2, you can begin to draw from it.

Answer 9

401K is the stock market
When the stock market crash, you lose your money
Therefore you have to continue put more money in to make up for the loss of money, so if the stock market goes up before you retire (around 70-1/2), you better cash it all immediately and pay high taxes usually around 50-60% so you don't lose it all!

Answer 10

401k means 401 thousand, if it is in money term -AiRLiNK