[Ambermerr]

I am applying for a job that offers 401k, and i've never had that before so am not familiar with what it is and how it works. Can anyone explain this to me?

[MomRMA]

A 401(k) plan is a stock savings (retirement) plan that usually has a percentage of match from the company. I am Human Resources where I work and suggest to all incoming employees to take advantage of it. I tell them to look at the match as a self given raise.

[Cheliebean]

A 401(k) is a retirement plan. It allows you to take a certain percentage (that you designate) from your paycheck and deposit it into mutual funds (mutual funds are basically a "fund" that invests in many different stocks so your risk is lowered by not investing in just one stock) that you will be able to choose from. There will be a fund management company, such as Fidelity or Charles Schwab that will gather your deposits and then invest them in mutual funds that you will probably be able to pick.

The amount that you deposit goes into the 401(k) pre-tax, so when you withdraw the funds at retirement, you will pay tax on the withdraw at that time.

Employers typically match your deposits up to a certain percentage. It is a good idea to have atleast the amount of the employers match withheld from your paycheck. This is known as maximizing the match.

Once you start depositing funds into a 401(k), you'll want to login to the asset manager and see what available mutual funds you can have your deposit directed into. Some are higher risk than others, so, depending on your age, you'll want to change your risk. If you are young, right now, you can afford to deposit in higher risk funds.

If you leave your current employer, you are able to "roll" your 401(k) into an IRA so it can continue to earn income. The 401(k) gains in value as the mutual funds gain value that you are invested in.

Hope this helps! I would definately sign up for it!

[sortaclarksville]

A part of your paycheck is redirected each pay period into an investment account. The money that is redirected is not taxable to you until you withdraw it when you retire. If you withdraw it before retirement, you pay tax along with a penalty. Most companies will match your contribution up to a certain %, so it's well worth contributing at least enough to get the maximum match that they offer.