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Learn what is a 401 (k) in under 2 minutes

Welcome to Professor Savings.com

We teach finance basics

Hi, I’m you’re host today Rayfil Wong

What is a 401 (K) plan? It is a popular retirement plan established by employers help employees set money aside to plan for retirement the great advantage of being part of a  a 401 (k) plan is eligible for tax benefit so you can stay away from Uncle Sam aka tax collector.

So let’s say Jane put $100 every month into 401 (k) plan they money is tax deferred meaning taxpayer delays paying taxes until you withdraw them this reduces your taxable income.

So let’s saw Jane here makes $1000 per month and contributes $100 to her 401 (k)

Her taxable income is $1000-$100 = $900another type of retirement strategy

 called roth 401 (k) allow you to make after tax contribution this way you wont have to pay

  tax when you withdraw the money after retirement the catch is that you will have to hold the money

  in the plan a certain of years after retirement breaking it down, the 401 (k) will help

  you help you stay disciplined in contributed to your retirement plan.

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