What is a 401K?
By: Louise Connell
We always hear people asking, “Are you contributing to your 401K?” but what exactly does that mean? Here’s what Wikipedia says:
“A 401(k) plan is the common name in the United States for the tax-qualified, defined-contribution pension account defined in subsection 401(k) of the Internal Revenue Code. Under the plan, retirement savings contributions are provided (and sometimes proportionately matched) by an employer, deducted from the employee’s paycheck before taxation (therefore tax-deferred until withdrawn during retirement), and limited to a maximum pre-tax annual contribution of $17,500 (as of 2013.)
Alternative employer-provided defined-contribution pensions include 403(b) and 401(a), offering higher mandatory limits.”
So, what is that saying? You can save your hard-earned money without it being taxed! The catch is, you can only use it after you have retired. But that’s the whole point. You don’t want to spend it now, because you will need it later when you are retired and not bringing home a pay check. Many employers will even match up to a certain percentage of the amount that the employee contributes. So, it is wise to check your 401(k) plan at work to see what is offered. It is smart to save now while you can! But, if you do find yourself without an income and without a 401(k) plan and still need instant cash, stop in at any of our InstaLoan locations and let us help.