What You Should Know About 401k Plans

2213 words 9 pages
Bits of What You Probably Should Know of 401 (k) Plans
--- The term 401 (k) is one that is heard quite often in today's. Most people know that it has something to do with retirement, but few young people know exactly how 401 (k) plans work or why they are becoming more and more popular. Additionally, many people who have 401 (k) plans may not know all the details of how they work, how to get the most out of their plan, and how to keep their money safe. In reality, everyone in the business world should be aware of the details and advantages of having and managing a 401 (k) type savings plan, as it is becoming one of the most popular ways to save for retirement in the United States and many other countries. First, it is imperative to
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It is difficult and costly to 401(k) before the defined age, employer matching contributions are usually not vested (i.e., do not become the property of the employee) until a number of years have passed (Neiters). One extremely important aspect of the 401(k) plan is how the money is protected. There are guidelines for how money in 401(k)s is maintained established in 1974 by the Employee Retirement Income Security Act (ERISA). The most important fact is that "a 401(k) plan account is not considered an asset of the employer as it is held in trust in a separate account. This means that retirement plan money is not commingled with the company's money. In addition the company cannot access the plan money for any purpose related to maintaining its business (The basics of a 401(k) plan)." In addition, 401(k) plans are generally protected from creditors of the account holder and are also protected in the case of employer bankruptcy (401 (k) - Wikipedia). The main aspect which is not covered is lost value of investments the account holder chooses.
Typically, 401(k) plans will include many options for investment, although the number and types of options vary from plan to plan. There are a few categories of options, the most common being mutual funds and company stock. Mutual funds include money market funds, bond mutual funds and stock


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