What Is A 401k?

The concept of a 401(k) is often a foreign one for many people, especially those who may not pay much attention to their finances. However, understanding the impact and benefits that a 401(k) can offer is something that anyone employed by a business that offers one should know in order to make the smartest decision about savings and long-term money management.

401(k) contributions are portions of your paycheck that are deducted automatically from each pay period that occurs, being set aside primarily for retirement purposes. The funds are reallocated into a number of different assets, depending on the plan you choose with your employer. These funds, although a form of savings, simultaneously act as insurance for employers against employees leaving early, given that access to the funds largely depends on the time spent working for the company. Nonetheless, there are a vast array of advantages that come with having a 401(k) plan, and understanding how it works is necessary for an informed decision.