A 401(k) plan is a retirement savings account sponsored by an employer. It lets workers save and invest a portion of their paycheck before taxes. These funds are invested in stocks, bonds or mutual funds.The employer may match the employee’s contribution up to a limit.
Some of the benefits of having a 401k are employer match (in some cases), you get tax breaks and shelter from creditors.
For tax breaks, an example is you don’t pay taxes until you withdraw it when you retire (59.5 years old). Also your savings grow tax deferred, meaning your money grows tax free as long as you stay in that plan, and that will allow your earnings to compound.
The meaning of shelter from creditors is you don’t have to worry about them because your plan is protected by the Employee Retirement Income Security Act of 1974 (ERISA).
Contact us if you need an audit on your 401k plan.