Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
How do you invest in a 401(k) plan?
Your employer automatically deducts your contribution from your pay. Investing in a 401(k) plan is automatic; your employer deducts your contribution from your pay. And although your employer may match all or part of your contribution, you need to contribute some of your salary to your 401(k) to receive an employer match.
3.
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.
4.
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.
5.
The summary plan description for your 401(k) plan explains _______.
How your 401(k) plan operates. It does not tell you how much it will earn. It does not know that.
