by: jenniferquilter
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Date: Fri, 2 Jul 2010 Time: 5:40 PM -
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A 401k program is an employer sponsored retirement plan. These are set up through a company your employer hires. You decide on a percentage of your income that you want to contribute each month, and this money is invested in a plan you've chosen with stocks, bonds, mutual funds, CDs, etc. In this way, and others, these accounts are built with the idea to help you succeed in growing your savings to become something you'll be able to live on and beat inflation.
Article Source: DirectoryArticles.com
Other than your investments there are some other ways these plans are built with your success in mind. The contribution match is a major one of these that is unique to this account. Not every employer offers these, so make sure to take advantage if yours does. Basically how the match works is that your employer agrees to match your contributions up to a certain percentage point that they've chosen. If, for example, they set the percentage at two percent, then if you contribute two percent of your income they will contribute that same amount of money to the account. While this can feel like a small amount of money, it builds up over time. You also have to consider that it's the amount you've contributed, the amount they've contributed, and then all of that is going to be invested, earning you returns.
There's a lot more than this to what a 401k program is and how it's built with your success in mind. For instance, the traditional account takes contributions from your income before taxes are taken out, meaning that some of the money you would have been paying in taxes is now being invested, earning you more.
You will have to pay taxes on this money when you make withdrawals in retirement, but until that point this money will help you build up your savings.
In all of these ways what a 401k program is, is a plan to help you reach your retirement savings goals.
In order to save enough for your goals you'll want to learn more about your retirement savings options like 401k or IRA contributions, what your account balance goals should be, and look at IRA or 401k Maximum
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