Understanding 401(k) Plans

What is a 401(k)?

• A bank account for daily expenses

• A loan you take from your employer

• A retirement savings account that lets you invest money from your paycheck

• A type of savings account for buying a car

Why is it important to contribute to a 401(k)?

• Because it helps you save for retirement with potential employer matching

• Because it helps you buy a house

• Because it lets you avoid paying any taxes

• Because it allows you to travel more

What is a company match in a 401(k)?

• When your company gives you a bonus

• When your company matches the amount you contribute to your 401(k)

• When your company gives you a gift card

• When your company pays for your vacation

What is the difference between a Traditional and a Roth 401(k)?

• Traditional 401(k) is for young people, Roth is for older people

• Traditional 401(k) contributions are taxed now, Roth contributions are taxed later

• Traditional 401(k) contributions are taxed later, Roth contributions are taxed now

• There is no difference between them

What should you do if you leave your job?

• Spend it on a vacation

• Roll it into your new employer’s 401(k) or an IRA

• Leave your 401(k) with your old employer forever

• Cash out your 401(k) immediately

What is a Target-Date Fund?

• A fund that guarantees high returns

• A fund that only invests in technology companies

• A fund that adjusts risk based on your retirement year

• A fund that targets specific stocks

What happens if you don't pick an investment option for your 401(k)?

• Your money will be automatically invested in the best option

• Your money will just sit there and not grow

• You will lose all your money

• Your employer will choose for you

What is the best strategy if money is tight but you want to contribute to a 401(k)?

• Wait until you are older to start contributing

• Contribute nothing until you have more money

• Only contribute if you get a raise

• Start with 1-2% and increase it over time

Retirement planning should ideally begin...

• a few years before retirement

• when all debts are paid off

• when kids go off to college

• when the first paycheck is received