401(k) Program
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A 401(k) Program is a U.S.-based tax-qualified defined contribution investment program defined in subsection 401(k) of the IRS tax code.
- Context:
- It can (typically) be designed for Private Corporation Employees.
- It is intended to be for retirement.
- It is intended to be Tax Deferred.
- It can (often) be sponsored by the Employer, through a 401k Plan.
- Withdrawals prior to age 59.5 are subject to a 10% penalty tax (except in the case of death, disability, or qualifying hardship).
- Withdrawals after the age of 59.5 are subject to taxation in the year the money is withdrawn.
- Example(s):
- Counter-Example(s):
- See: Pension, Tax Deferral, 403(b), 401(a), U.S. Social Security, Individual Savings Account, Mutual Fund.
References
2015
- (Wikipedia, 2015) ⇒ http://en.wikipedia.org/wiki/401(k) Retrieved:2015-1-12.
- In the United States, a 401(k) plan is the tax-qualified, defined-contribution pension account defined in subsection 401(k) of the Internal Revenue Code. Under the plan, retirement savings contributions are provided (and sometimes proportionately matched) by an employer, deducted from the employee's paycheck before taxation (therefore tax-deferred until withdrawn after retirement or as otherwise permitted by applicable law), and limited to a maximum pre-tax annual contribution of $18,000 (as of 2015). [1] [2]
Other employer-provided defined-contribution plans include 403(b) plans, for nonprofit institutions, and 457(b) plans for governmental employers. These plans are all established under section 401(a) of the Internal Revenue Code. 401(a) plans may provide total annual addition of $52,000 (as of 2014) per plan participant, including both employee and employer contributions.
- In the United States, a 401(k) plan is the tax-qualified, defined-contribution pension account defined in subsection 401(k) of the Internal Revenue Code. Under the plan, retirement savings contributions are provided (and sometimes proportionately matched) by an employer, deducted from the employee's paycheck before taxation (therefore tax-deferred until withdrawn after retirement or as otherwise permitted by applicable law), and limited to a maximum pre-tax annual contribution of $18,000 (as of 2015). [1] [2]
2015b
- https://secure.myubiquity.com/d401k/ecs/employee/glossary.html#18
- QUOTE: A 401k plan allows employees of private corporations to save pre-tax dollars for retirement through a plan sponsored by their employer. To encourage saving for retirement through these plans, the federal government created special tax advantages for 401(k) contributions. Amounts allowed by law are limited to a set amount revised each year by the IRS based on inflation. Many companies, to encourage employee participation in the plan, match employee contributions. Employee contributions along with employer matching funds may be invested in many options, all which are controlled by the employee. Those options include all types of mutual funds, stocks, money market funds, etc. Employees control how the assets are allocated among the various choices and can move the money as they see fit. Withdrawals from 401k plans prior to age 59.5 are subject to a 10% penalty tax except in the case of death, disability, or qualifying hardship. Withdrawals after the age of 59.5 are subject to taxation in the year the money is withdrawn.