Understanding 401(k) Plans

What is a 401(k)?

• A type of health insurance

• A tax-advantaged retirement savings plan

• A real estate investment trust

• A government bond

What are the two major types of 401(k) plans?

• Standard and Premium

• Basic and Advanced

• Traditional and Roth

• Fixed and Variable

What is the main tax advantage of a traditional 401(k)?

• It is exempt from all taxes

• Withdrawals are tax-free

• Contributions are tax-deductible

• It offers a tax credit

At what age can you start making penalty-free withdrawals from a 401(k)?

• 65

• 55

• 50

• 59½

What is a Roth 401(k)?

• A retirement savings account funded with after-tax money

• A savings account with no tax benefits

• A type of health savings account

• A government pension plan

What is the 401(k) contribution limit for employees under 50 in 2024?

• $20,500

• $25,000

• $19,500

• $23,000

What is a key benefit of employer matching in a 401(k)?

• It allows for tax-free withdrawals

• It provides immediate liquidity

• It guarantees a fixed return on investment

• It increases your retirement savings without additional cost to you

What is a target-date fund?

• A fund that guarantees a fixed return

• A fund that invests only in government bonds

• A fund that automatically adjusts its asset mix as you approach retirement

• A fund that invests in real estate

What happens if you withdraw from a 401(k) before age 59½ without qualifying for a hardship withdrawal?

• You pay a 10% penalty

• You receive a tax credit

• You pay no taxes

• You can only withdraw a limited amount

What is the purpose of a 401(k) plan?

• To save for retirement

• To buy a house

• To invest in stocks

• To pay for education