Summary of How Your 401(k) Plan Works

The traditional 401(k) plan is a very popular retirement plan because both employers and employees can contribute without taxation to the employee until funds are withdrawn. It is becoming more popular with employers who want to offer retirement benefits but who cannot afford a traditional defined benefit plan. Indeed, these days when someone mentions an employer retirement plan, most of us probably think of the 401(k).

There are many variations on the 401(k) plan formula that make the plan flexible enough for almost any employer. The plan distribution options also make it very attractive to employees who may or may not remain with the same employer until retirement age.