What Is 401K For?

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July 2, 2014

David Pipes

401(k) is a part of the Internal Revenue’s Tax code. It is the part that allows employers to establish defined contribution plans for their employees. In a defined contribution plan each employee has their own account. The employer has the option of contributing to the plan. Usually a selection of investments is available to the employee. The Employee is then responsible to select the investment(s) to be used for their account. The employer’s contribution, if any, is frequently directed by the employer into a certain investment. The 401(k) is rapidly becoming the retirement plan of choice in the USA.

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