Choose wisely. There is only one correct answer to each question.
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1.
What's the minimum amount you should try to invest in your 401(k) plan?
At least enough to get the employer match. Some people may not be able to contribute the maximum each year. But at least contribute enough to get the full employer match. That's free money.
2.
How should you choose from among your 401(k) plan options?
Choose options that will allow you to reach your financial goal. For some investors, that may mean stock funds only. For others, it may mean investing in bonds and cash options, too.
3.
The 401(k) plan is a type of _______.
Defined contribution plan. The amount of money that 401(k) plan participants receive in retirement is based on the amount that they (and their employers) contribute to the plan, in addition to the investment returns they earn on those contributions. "Defined benefit" plans, such as pensions, generally pay a guaranteed sum based on wages and years of service.
4.
Which of the following would your 401(k)'s plan document not tell you?
How much your 401(k) will earn. The plan document has no way to know this.
5.
What are the tax advantages of a 401(k) plan?
Both of the above. You defer taxes on any investment gains and distributions AND save on taxes now, because you're investing in your plan with pre-tax dollars.
