What You Need To Know About A 401k Retirement Plan

As we move further and further into the New Millennium, finance is also changing from a global and personal perspective. This is true especially in the case of pensions which is the mainstay of senior citizens in this day and age.

Nowadays, people are investing their money in what is known as a 401k retirement plan, thanks to this new financial instrument that was created by Congress in 1981. Its name is derived from the Internal Revenue Code section that details out the plan.

So, what is a 401k retirement plan?

Consider it to be a special account that is funded by pre-tax payroll deductions. The funds that accumulate in this account are usually invested in a number of different bonds, stocks, mutual funds among other assets.

The best part about opting for a plan such as this one is the fact that it is favored greatly by the government in not being taxed on any interest, capital gains or dividends provided it isn’t withdrawn. Of course, if these gains remain in the account, it remains untouched by taxation.

But there are more advantages to this type of ‘pension’ plan apart from taxation. They are:

#1: Employer offer the same percent invested in a 401k plan

#2: Just in case you decide to leave your current employer, you can transfer your current plan to a new employer, into a new account.

#3: An individual can decide which type of assets that he/ she would like to invest in, and there are a wide range of choices available through this plan.

#4: During times of hardship, one can make withdrawals by ensuring a few conditions are met, and which you have to discuss with your plan administrator.