retirement

What is a 401(k) plan?

 

What is a 401(k) plan?

The Bankrate.com financial term of the day is: "401(k) plan."

A 401(k) plan has a somewhat funny name but a decidedly serious purpose: to allow workers to build up savings for retirement, typically with some help from the boss. Employees put aside a percentage of their pay to be invested; their employers may partially match the amount put in and may kick in some profit-sharing. Taxes on the income directed into the plan and on the investment returns aren't owed until the money is withdrawn. Withdrawals before age 59 ½ trigger a penalty. Oh, and the funny name? It comes from the section of the federal tax code that authorized these plans.

Participating in your 401(k) plan at work is a good way to start saving for retirement.

To explore your retirement saving options, visit the retirement section at Bankrate.com.

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
 

A little research could save you BIG on interest.

Don't have time? Our rate-tracker tool saves you time and money. Delivered Thursdays.
 
advertisement
Partner Center
advertisement

Blog

Tara Baukus Mello

2 years free charging from Nissan

Nissan is hoping to spur more sales of electric cars with an incentive that offers new buyers two years of free public charging.  ... Read more


Connect with us