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Tag: 401k Rules

What is a 401K?

In these stressful economic times, as people search for employment or college graduates head off to their first interviews, they will probably hear about 401k plans. Many will ask what is a 401k? The term is tossed about, but many do not have a good understanding of the topic. A 401k is a type of retirement savings account offered by many companies in which employees contribute part of their wages to this fund, allowing it to generate interest, and they are not taxed on those earnings until the funds are withdrawn at retirement age which is generally after age 59. In many cases, the employer matches or at least supplements the worker’s contributions. These plans are also known as IRA’s, or individual retirement plans. In self-directed IRA’s, the individual is able to make investments with his or her earnings, such as in stocks and bonds, to add to earnings and have a more ample retirement.