If you just started a new job, and you’re looking at the 401(k) options that are available, you probably have questions about how it all works. Your golden years depend on the investment choices you make today. And if you’re counting on your 401(k) to be a big part of your financial picture, it’s important to get your questions answered.
What Is a 401(k) Plan?
A 401(k) is an employer-sponsored plan for retirement savings. It allows employees the benefit of having retirement savings taken out of their paychecks before taxes. If your workplace offers a 401(k), you’ll fill out an enrollment packet that includes information about vesting, beneficiaries, and investing options.How Many Types of 401(k)s Are There?
There are two basic types of 401(k)s—traditional and Roth. Both are employer-sponsored retirement savings plans, but they’re taxed in different ways.A traditional 401(k) offers tax benefits on the front end. Your money goes in tax-free, but you pay taxes on the employer match (if you have one) and the withdrawals you take out in retirement—that includes all growth on your contributions, too.
