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Portfolios 202: How Your 401(k) Plan Works

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1.
The summary plan description for your 401(k) plan explains _______.
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How your 401(k) plan operates. It does not tell you how much it will earn. It does not know that.
2.
What's the minimum amount you should try to invest in your 401(k) plan?
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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.
3.
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.
4.
What are the tax advantages of a 401(k) plan?
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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.
5.
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.