What Is a 401(k) Plan? An Introduction for Employees In Texas

A 401 (k) is the type of account that, if understood and utilized correctly, can help you meet your retirement goals. Although there are many types of 401 (k) s out there including a simple, safe port, and individual 401 (k) s, we will discuss here more popular traditional and Roth 401 (k) s. Basically, 401 (k) in CXC Solutions is a plan that is sponsored by employers where employees are allowed to save for their retirement. 

This is a different type of contribution plan (DC) that is different from traditional pensions known as the defined allowance plan (DB).  Under retirement (which is a DB plan), retired people generally receive a predetermined monthly number calculated based on the history of income, year of work, and age. 

Because monthly payment benefits will continue regardless of the underlying investment performance, the employer basically has risks to contribute more money into DB plans to fulfill future payment obligations. In short, the employer bears the risk of investment.

Retirement Planning and Plan Options

Image Source: Google

Under 401 (k) (which is a DC plan), the number contributed by employees and employers every year is generally determined. For example, for 2011, an employee can contribute 100% of the income obtained by an amount that does not exceed $ 16,500. If employees are over 50 years old, they can contribute an additional $ 5,500 called the provisions of the pursuit of lag. Employees can also increase, reduce, or stop their contributions during this year within certain boundaries.

Entrepreneurs, on the other hand, are generally not required but can make contributions that match the account 401 (k) employees. While 100% of immediate employees are in their personal contributions (they are 100% owned by employees), entrepreneurs generally determine the vesting schedule which determines what percentage of the employer's contribution is given for the number of years.