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>>What is a 401k? >> >>In simple terms, the 401k retirement plan is a trust >>in which employees are allowed to contribute money >>before taxes are assessed. Some employers also provide >>participants with matching funds to the employee's >>401k account as part of their benefits package. The >>employee may have the option of selecting specific >>investment options for the money in their 401k >>account. Besides building retirement funds, >>contributing to your 401k reduces your taxable income >>and helps you keep more of your hard-earned money. >>401ks are widely regarded as an excellent financial >>tool and means of building your pension for >retirement. >> >>Who can participate? >> >>If your employer offers a retirement plan that >>qualifies under 401k laws and you are a full-time >>employee then you may participate. >> >>How does it work? >> >>Generally payments are auto-deducted from your >>paycheck into your retirement account. Your balance is >>invested according to the specifications made when you >>joined the plan. If your employer provides matching >>funds, this part of your account balance may not be >>available for some number of years after which it >>becomes part of your vested balance. >> >>Your 401k money is not taxed until you withdraw it, so >>if you've retired, you will likely be in a lower tax >>bracket which results in less money going to the tax >>man. Also your money grows faster though the power of >>tax-deferred compounding interest. >> >>Since 401k contributions are typically made directly >>from your paycheck, saving for retirement is made >>easy. It is even possible to take out a loan against >>your 401k account balance, and the best part is that >>any interest that you would be paying on the loan >>won't go to a bank, it will be deposited into your >>account along with the repaid principal. Be sure that >>you are prepared to leave the money in your 401k >>retirement plan alone, since there is a 10% penalty >>for early withdrawal and you will be liable for the >>deferred income taxes.

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