ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A 401(k) plan is a company-sponsored retirement account to which employees can contribute income, while employers may match contributions. There are two basic types of 401(k)s-traditional and Roth-which differ primarily in how they’re taxed.

Detailed explanation-2: -A 401(k) plan is a qualified plan that includes a feature allowing an employee to elect to have the employer contribute a portion of the employee’s wages to an individual account under the plan. The underlying plan can be a profit-sharing, stock bonus, pre-ERISA money purchase pension, or a rural cooperative plan.

Detailed explanation-3: -It is a defined contribution plan, which means it is completely up to the will of the employee as to how much they are willing to contribute to their account, subject to annual limitations. Contributions made by the employee are directly withdrawn from their 401(k) account and invested in the funds of their choice.

Detailed explanation-4: -A 401(k) is an employer-sponsored retirement plan, sometimes called a defined contribution plan (in contrast to a defined benefit pension plan). It allows employees to make pre-tax contributions to the plan, up to a specified amount each year.

Detailed explanation-5: -The main difference between a 403(b) and 401(k) is the type of employer who offers them. 401(k) plans are offered by private, for-profit companies. 403(b) plans, on the other hand, are offered by tax-exempt and nonprofit organizations.