What Is The Purpose Of A 401k Plan ?  

The purpose of the 401k plan originally was to be the last stage of the perfect and ultimate three-layered retirement savings strategy. Under this foolproof idea, the employees were guaranteed income post retirement from Social Security and a pension plan chalked out by the company and these would be supported by other savings over one’s career in a 401k plan.

The current purpose of the plan on a macro level is to act as the main retirement financial support for employees in the private sectors. Studies at the Centre for Retirement Research at Boston College show that 63 percent of the employed masses who have pension plans, consider the 401k as their main and only retirement plan. The recent recession has created much conversation around the effectiveness of the plan are the primary financial support for retirement for American citizens.

On a smaller, micro level, the objective of the plan, from the worker’s perspective, is to act as a savings method for retirement which has tax benefits. Employees agree to have their companies set aside a certain sum from their income on a tax deferred basis to a retirement plan like the 401k. This income is not liable to be taxed by the federal government at the time when it is deferred and is not considered as taxable on the worker’s income tax returns.

For the employer, this plan acts as a means to control the quality of performance of the employee. It acts as a magnet to draw and hold on to competent personnel. But there are companies who do not offer such retirement plans. Those who do, have a lot of say in the features of the plan. Thus the plan differs extensively in elements from patron to patron, stretching from meager 401k plans to more affluent plans with bigger companies matching the employee’s contributions.

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What Is The Purpose Of A 401k Plan

 

 

    
 

When-Can-I-Take-Money-Out-Of-My-401k      The official age limit for any withdrawals made from the 401k account has been determined at 59 and half years. One is expected to start withdrawing latest by the age of 70. But due to the recent fall in the stock markets, people are concerned even more about when they can start withdrawing especially for those who have been adversely affected by the recent recession. More..

 


 

 

 
   
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