401K Retirement Planning News and Information
Many Americans use 401K programs as the most important component of their retirement planning. 401Ks are largely self-directed retirement accounts, normally with some matching contributions made to the account by the employers. The plans are usually administered by a specialized financial services provider that allows the plan holders to make selections between various investment vehicles, which usually include a mix of mutual funds grouped by asset type diversification.
The 401k program is an American retirement plan under the section 401 of the Internal Revenue Service (IRS) code offered to employees to save part of their salary for retirement savings and in return allow them not to pay tax until they withdraw funds in retirement. Thus, it is a form of tax incentive to the employee by the employer with the approval of the IRS.
It is a form of investment that was aimed at encouraging people to save for retirement. This plan was conjured up as early as 1978 but it was not until 1982 when the first employees started saving through these types of plans. Some of the benefits of 401K is that you may accumulate assets without having to remember to save, as your employer will do it for you through automatic deposits. Additionally, your employer will usually add their own money to your contributions by matching a certain dollar amount or percentage. The 401k program can be used as the primary retirement savings vehicle or as a supplement to self-direct IRA programs. It is important to understand that the employer manages the plan, they do not administer the plan - the financial services company actually creates the investment products from which you select. Additionally, it is important to consult independent financial advisers when structuring retirement savings plans, as neither the employer nor the 401k administrator can understand your individual financial situation.
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