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Portfolios 202: How Your 401(k) Plan Works

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1.
The 401(k) plan is a type of _______.
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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.
2.
When you choose from among your investment options as you set up your 401(k) plan, you should choose a little from each option.
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False. As a rule, it is best to choose only those options that will help you reach your financial goal.
3.
Your 401(k) plan's retirement planning tools will analyze _______.
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All of the above. These are typical factors that a program will look at.
4.
Which of the following would your 401(k)'s plan document not tell you?
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How much your 401(k) will earn. The plan document has no way to know this.
5.
How do you invest in a 401(k) plan?
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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.