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Some of the Most Common Questions People Ask about 401(k) Plan

When you want to invest money for the long-term, you don’t invest all of your money in stocks, only to face huge losses. You need to ensure you’re putting different eggs in different baskets so that you can manage your money for the future without any problem. 

Even though it’s extremely important to plan the essential things for your future requirements, there are a couple of things that are more critical than dependable and long-lasting financial resources to support your life during your retirement age. 

You will have hundreds and thousands of employees when you’re a business owner. Most of them will be concerned about their retirement savings. As the employer, you can offer them to invest in their 401(k) account. However, you also need to ensure you’re answering these questions properly. 

Your employees will have a couple of questions, from how much money they should put in their 401(k) account to what will happen to their account when they change jobs. Here are some of the most common questions people ask about the 401(k) plan. 

What is a 401(k) Plan?

The 401(k) retirement plan is known as the amount deducted from your current payroll and invested as per your chosen area. You can contribute a specific amount of your payroll to your 401(k) account. The amount will be tax-free, depending on your chosen 401(k) plan. 

If you want to contribute money to your 401(k) account, the specific percentage will be deducted from your payroll automatically every month. The money will be deducted before the government implements taxation. Apart from that, the money you contribute will be invested at your discretion into one or multiple funds over time. While the money grows in your 401(k) account, you don’t need to worry about any taxes as long as you don’t decide to withdraw money. The 401(k) plan is named after the United States Tax code. Click here to visit website if you want to know more. 

What Is the Primary Role of the Employer?

Traditional 401(k) plans are offered and maintained by employers. This is why they are called employer-sponsored plans. The primary role of the employer is to match the employees’ contribution. This means that they need to contribute a specific amount to your 401(k) plan if you contribute specific amount. 

Suppose the company you work for has a policy of matching 50%, and you want to contribute 6% of your overall yearly salary into your 401(k) account. In such a case, the company is obligated to contribute 3% of your total contribution.

As per Forbes, ensure you always maximize the employer’s match. As it’s free money, you will be able to leverage various investment benefits in the long term. 

Do All Companies Need to Match 401(k) Contributions?

Even though large companies do it, employers are not required to match the 401(k) contribution of their employees. 

Whether a company should match the 401(k) contribution is entirely dependent on their policy since the match is one type of profit. If your employer doesn’t have a highly profitable business, they might not match. 


These are some common questions you need to know about a 401(k) plan. If you have any more questions, feel free to contact us.