Best Best Reviews

Review:

Traditional 401(k)

overall review score: 4.5
score is between 0 and 5
A traditional 401(k) is a retirement savings account sponsored by an employer that allows employees to save and invest a portion of their paycheck before taxes are taken out.

Key Features

  • Employer-sponsored
  • Pre-tax contributions
  • Tax-deferred growth
  • Matching contributions possible

Pros

  • Tax advantages: Contributions are made with pre-tax dollars, reducing taxable income.
  • Employer match: Some employers offer matching contributions, effectively doubling the employee's savings.
  • Investment options: Traditional 401(k)s often offer a range of investment options to help grow retirement savings.

Cons

  • Early withdrawal penalties: Withdrawals before age 59.5 may incur taxes and penalties.
  • Required minimum distributions: Participants must start taking distributions at age 72, potentially affecting retirement plans.
  • Limited contribution limits: Contributions are capped each year, limiting the amount individuals can save.

External Links

Related Items

Last updated: Sat, Feb 1, 2025, 02:30:02 AM UTC