Basics of a 401k - 2018 401k Contribution Limits and Guidelines | Summary and Q&A

TL;DR

401k is a tax-efficient retirement savings account with employer matching and contribution limits.

Key Insights

• 🚕 401k plans offer tax advantages like pre-tax contributions and tax-free growth of investments.
• ⌛ Employer matching contributions can significantly boost retirement savings over time.
• 🌱 Contribution limits for 401k plans have increased, providing more savings opportunities.
• 🤕 Ketchup contributions offer additional savings options for individuals aged 50 and above.
• 🌱 Investment options in a 401k plan vary, with choices like equity funds, bond funds, and balanced funds.
• 💗 Maximizing employer matching and contributions can help individuals grow their retirement savings quicker.
• 🌱 Considering the length of investment and risk levels of funds can help in choosing suitable investments in a 401k plan.

Transcript

what is a 401k and how does it work a 401k is an employer-sponsored qualified retirement savings account there are a few different types of 401k plans and investment options can vary from employer to employer so there are three main benefits of 401k plans first when you make deposits often called contributions to your 401k plan well these contribut... Read More

Questions & Answers

Q: What are the main benefits of a 401k plan?

401k plans offer pre-tax contributions, tax-free growth of investments, and potential employer matching, making them a powerful retirement savings tool.

Q: How do contribution limits for 401k plans work?

Contribution limits for 401k plans in 2018 increased to $18,500 for employees, with a total contribution limit of $55,000, including employer matching and ketchup contributions for those aged 50 or above.

Q: Why should individuals contribute to their 401k plans?

Contributing to a 401k plan is beneficial due to potential employer matching, lower taxable income, and tax-free growth of investments, ultimately helping individuals build a substantial retirement fund.

Q: What investment options are typically available in a 401k plan?

Investment options in a 401k plan can include equity funds, bond funds, balanced funds, and international funds, each with different risk levels and descriptions of what they invest in.

Summary & Key Takeaways

• 401k is an employer-sponsored retirement account with pre-tax contributions.

• Benefits include tax-free growth of investments and potential employer matching.

• Contribution limits for 2018 increased, with options like ketchup contributions for baby boomers.