A Look At The 401 K Plan

The 401(K) is one of the most common forms of retirement savings in the whole world

. This retirement savings plan is based in the USA, and although the 401(K) is not its official name, the plan has been known as that ever since it was set up under section 401(K) is the IRC (Internal Revenue Code.) In this retirement plan, you will get to find that someone gets to collect his or her funds after he or her has reached at least fifty-nine and a half years. Before one attains this age, one cannot withdraw the funds without facing a stiff penalty.

The most unique think about the 401(K) pans is the fact that it was meant to help encourage the employees to start paying greater attention towards their retirement, and the plan helped shift this rather heavy burden to them. Before that, people were mainly taken care of by the employer. The worst problem with this plan though was the fact that many employees were left desolate when the companies that they had worked for decades wound up. However currently, the number of people who are joining the scheme is reducing by the day.

Although contributions to 401K schemes are voluntary, it is extremely important to note the fact that they are highly encouraged by the government. America, being a country that is well known for its inconspicuous consumption, needed a plan to help it citizens save. In order to encourage people to save for the long term, contributions to the 401K were exempted from taxation. In addition to this, the interest and the withdrawals from the pension scheme were only taxed when being withdraw from the scheme.

One thing that you ought to know about the 401 K is the fact that despite the fact that the scheme attracted a lot of people during its infancy years (with an enrolment rate of about 60 %,) the majority of new workers are no longer showing as much enthusiasm about the scheme. This is because of the fact that nowadays, there are more schemes out there that people are willing to try out, than they were years back.

At the end of the day, it is extremely important to state here the fact that the 401 K plan has become extremely popular the world over, and many countries have expressed their desire to set up their own versions of the 401 K plan. One of these countries is none other than Japan.

by: David de Souza

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