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401K Retirement Plan Explained

401K Retirement Plan Explained

401k retirement plans are a form of pension, which is distributed
when the individual retires. In general, 401k retirement plans include
contributions from the employee while they are employed. Those
contributions may be matched by the employer. Contributions are
generally taken from pay, before taxes are applied as an income tax.
Retirement
plans such as 401k retirement plans are meant to be collected by the
individual after retirement. In fact, there is a penalty for early
withdrawal from the plan. However the 401k retirement plan can be used
for several other purposes without penalty. The plan may be used to pay
to go to college or in order to purchase a first home.
Generally
when an individual makes contributions to a 401k retirement plan, they
can select which types of investments will be included in the plan.
They may select from a list provided by the employer or they may meet
with plan administrator to discuss risk factors, as well as short term
and long term investments. However, in some cases, employees are not
given the option of making investment selections and the administrator
simply invests the entire companies 401k in certain investments,
generally those that carry a low risk.
401k
retirement investment plans are a good way to ensure that the employee
has an income when they retire. In addition, the money can be withdrawn
in an emergency, but there will be a penalty incurred, including a
large tax on the monies withdrawn.

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