What Exactly is a 401k and How Does it Work?

Want to know what exactly is a 401k and how does it work? Learn what is a 401k plan all about now!. The different point of views of the financial experts regarding 401k plan. There are so many books that can teach everyone what is a 401k all about. Today, let’s discuss 401k plan, its meaning and definition and some advice from financial experts like Suze Orman and Robert T. Kiyosaki. ^{(See Related Post)}

What Exactly is a 401k

According to the book of The Wall Street Journal: Lifetime Guide to Money,

“A 401k plan is an employer-sponsored retirement-savings plan funded by employees with contributions that are deducted from pretax pay. Employers frequently add matching contributions up to a set limit. Employees are responsible for managing the money themselves, allocating the funds among a selection of stock, bonds, and cash investment funds. Investment gains are not taxed until the money is withdrawn.” ⁽¹⁾ 

Reference: ⁽¹⁾C. Frederick Wiegold, Author, The Wall Street Journal Lifetime Guide to Money: Everything You Need to Know About Managing Your Finances for Every Stage of Life, 1997 Hyperion, 114 Fifth Avenue, New York, New York 10011, p. 495

Related Post: Robert Kiyosaki and Suze Orman Thoughts on 401k Plans

How Does a 401k Work at Retirement?

In my opinion, 401k plans can help you save for your retirement target earning asset. A retirement target earning asset is very important when you retire, the idea is make the money work for you because your goal is to enjoy your life when you retire. The earnings from your 401k plans every year can use to sustain your lifestyle expenses.

Other Interesting Topics: Does 401k Make Sense? and also read Can 401k Make Your Rich?

Did I explain to you what exactly is a 401k and how does it work? If not, kindly use the comment box and share your opinions! Thank you!