Understanding 401(k) Plans and Features

Understanding 401(k) Plans and Features

Assessment

Interactive Video

Business

9th - 10th Grade

Practice Problem

Hard

Created by

Sophia Harris

FREE Resource

The video explores the 401(k) retirement plan, its history, benefits, and drawbacks. Initially designed as a tax deferral for executives, it became popular after the IRS allowed salary contributions. The 401(k) offers tax benefits and employer matches but comes with risks like investment management and fees. It has largely replaced traditional pensions, leading to a retirement savings crisis. Despite challenges, it remains a valuable tool if used wisely.

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10 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What year did the IRS rule that employees could contribute to their 401(k) from their salary?

1981

1996

1980

1978

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the most attractive feature of a 401(k) plan?

Low fees

Guaranteed returns

Employer match

No risk

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How does a 'pre-tax' 401(k) contribution benefit you?

Lowers taxable income

Increases taxable income

No tax benefit

Immediate tax refund

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a potential risk of managing your own 401(k) investments?

Guaranteed returns

Employer manages it

No fees

Investment in risky sectors

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What percentage of 401(k) participants are unaware of the fees they pay?

50%

10%

37%

73%

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is 'vesting' in the context of a 401(k) plan?

Ownership of all funds from day one

Delayed ownership of employer contributions

Immediate ownership of funds

No ownership of funds

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What was the original purpose of the 401(k) plan?

To replace pensions

To supplement pensions

To eliminate retirement savings

To provide immediate cash

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