401(k) Quiz

What is a 401(k)?

• A retirement plan designed by the United States Congress to encourage Americans to save for retirement.

• A type of savings account that is taxed when contributed, so no taxes are collected when withdrawn at retirement.

• A type of retirement plan where employers match employee contributions up to a certain percentage.

• A workplace retirement plan that allows you to make annual contributions up to a certain limit and invest that money for your later years.

What is the maximum contribution limit for a 401(k) plan in 2024?

• $23,000

• $22,500

• $61,000

• $66,000

Do employers have to match employee contributions in a 401(k) plan?

• Yes, employers are required to match employee contributions.

• Employers can choose whether or not to match employee contributions.

• Employers can only match a certain percentage of employee contributions.

• No, employers are not required to match employee contributions.

What are the limitations on the combined employer-employee contributions in a 401(k) plan?

• There are no limitations on the combined contributions.

• $20,500 in 2022 and $22,500 in 2023

• It depends on the employer's matching policy.

• $61,000 in 2022 and $66,000 in 2023

What is the penalty for taking withdrawals from a 401(k) before age 59.5?

• 5% penalty in addition to any taxes owed

• 10% penalty in addition to any taxes owed

• Withdrawals are not allowed before age 59.5

• No penalty, but taxes must be paid on the withdrawals

When was the 401(k) plan designed?

• 1978

• 1990

• 2000

• 1980

What is the purpose of 401(k) plans?

• To encourage Americans to save for retirement

• To make it easier and cheaper for companies

• To provide supplementary retirement savings

• To replace company pension plans

Why should you open a 401(k) when you are young?

• To receive matching contributions from your employer

• To earn more money due to the power of compounding

• To avoid paying taxes on contributions

• To have access to the funds at any time

What happens to the returns earned in a 401(k) account?

• They are reinvested back into the account and begin generating returns of their own

• They are distributed to the account holder as cash

• They are donated to charity

• They are used to pay taxes on the contributions

Is opening a 401(k) automatic?

• No, you must opt-in to open a 401(k)

• Only certain employees are eligible for a 401(k)

• Yes, it is automatically opened for all employees

• It depends on the employer's policy