401k Plan Essay

What is a 401k plan? Almost all employers will give a retirement savings plan for their employees. Under these plans, also called contribution plans, you may be able to save money toward your retirement along with a tax deferred basis, which means that you won't have to pay federal or state income taxes on your savings or their investment earnings until you withdraw your money during retirement. The most well known types of employer sponsored retirement savings plans are called 401k, 403b or 457 plans, so named for the Internal Revenue Service tax codes that govern them, and Thrift Savings Plans. Each of these plans target different sets of audiences- (401k plans are offered to employees of public or private for-profit companies, 403b plans …show more content…
How do 401k plans work out for you? If you have a normal 401k plan, money can be deducted from your paycheck before taxes are withdrawn, which greatly lowers your taxable income along with lowering your taxes. In addition, many employers have started to offer a Roth 401k plan, which would combine the features of a regular 401k with the features of a Roth IRA. Even though it doesn't come with an upfront tax break, your account will grow tax free and withdrawals will not be later taxed from you, given you have had possession of this account for the minimum of at least five years and are of the age of fifty nine and a half or older, or you have become disabled or passed away. Some employers may give you a waiting period before you can start making plans to be involved in their 401k, which they are allowed to make last anywhere from a month to a full year, while others may allow employees to begin making contributions immediately or whenever they please . Also, it's not uncommon for an employer to wait for you to pass a(n) similar waiting period before they feel it is necessary to start making contributions and match making to