401(k) Plan: Who Qualifies and What You Get
Learn how a 401(k) plan works, including employer matching, payroll deductions, and the rules regarding your access to funds.
A 401(k) plan is a retirement savings program offered by many employers in the private sector.
Who it's for
This plan is available to employees working for private-sector companies that choose to participate in the program.
What you get
You can save a significant amount of money each year due to high annual contribution limits. Additionally, many employers offer a match, which means they contribute extra money to your account based on how much you put in yourself.
What it costs you
Money is taken directly from your paycheck through automatic payroll deductions before you receive your salary. You are also limited to choosing from a specific menu of investment options provided by the plan.
The catch to know
You might not have immediate access to all the money your employer contributes. Many plans use a vesting schedule, which is a timeline that determines how much of the employer-matched funds you actually own based on how many years you have worked for the company.
How to apply
- Check with your employer to see if they offer a 401(k) plan.
- Contact your human resources department or plan administrator to enroll.
- Decide how much of your paycheck you want to contribute.
- Select your preferred investment options from the provided list.