Your 401(k) plan is a retirement savings account that lets you save for the future while benefitting from tax advantages. But just because you have one doesn’t mean you know how to take advantage of it. Are you looking to find out if your investments can be diversified with physical precious metals like gold bullion or silver coins?
What is a 401(k) Plan?
401(k) plans are a legacy of the United States Government, not just Ted Benna.
Ted Benna is considered by many to be the father of 401(K). What few people know though, is that he had little involvement with their creation and instead helped found them at his company in 1975. It was only after Section 401 (a)(4) K was added in 1978 did employees learn how they could use this provision to create retirement accounts with tax advantages for themselves when they retired from work or became disabled before reaching age 65 years old
401(k)s have quickly become the most popular retirement vehicle in America. The first 401(k) plans were offered in 1980 and by 1990 nearly 50 million employees had them through their employer, with 95% of private employers featuring a 401(k). An estimated 40 million Americans plan to retire on these accounts alone – that’s two thirds of all retirees!
As a defined contribution plan, the maximum allotted 401(k) funding responsibility for each account holder is their paycheck. Employers have some options to fund this program: matching individual contributions or deducting pre-tax dollars from employees’ paychecks and using it towards retirement savings.
Private, for-profit employers are the most likely to offer 401(k) plans. Non-profits may have similar 403(b) plans and public organizations might make 457s available as well; however those in civil service will only be eligible if they meet certain conditions such.
One of the most powerful incentives for retirement savings is an employer match. The company that sponsors a 401(k) program can offer up to 3% in matching funds on contributions employees make, and this money may be matched 100%. Employees are getting free cash from their employers without even realizing it! In addition, these matches let you bypass IRS-imposed contribution limits–$19500 as of 2021–and surpass them by saving more than what’s allowed with just your own income
There is a limitation to 401(k)s, namely that there are limited investment options. You cannot invest in many physical asset classes like fine art and real estate with your 401(k). Typically, contributions are siloed into ETFs or mutual funds as stocks for example.