The Concept of 401k

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401k is basically a retirement savings account which gained popularity in the recent decades. It is an alternate to traditional system of pension in which the employer was bound to pay pension to the retired employees. 401k believes in the contributions made by the employees during their years of service and they get the maturity of same on retirement. Some employers do contribute in the 401k savings of their employees but it is not mandatory for them in usual cases.

There is no tax on the 401k savings account as long as it's not withdrawn. That means investments can be made by the keeper of that account and the same amount can be grown many folds. There will be no tax on the investments so made and there will be no tax on the increments in the savings due to such investment. The holder of 401k account has to pay tax only at the time of withdrawal which is usually on retirement in most cases.

The basic concept of 401k is that employees should have a decent amount at hand at the time of retirement. It's on the employees what they would like to do with such amount after retirement. As such amount is usually made from the contributions of employees; they usually own such amount and spend carefully for their future. They can create an income source out of such amount or they can purchase something out of it at their will. The great aspect is that people have plenty of amounts at the time of retirement at hand which is made by them.

There is a maximum limit imposed by the government on 401k savings account. It's usually for high earning employees and most people are not affected by that. Also that limit keeps increasing every year so it's not a big worry for most of 401k account holders. Calculating 401k is also very easy these days because internet gives that convenience. There are many websites over the internet that allows people to make free calculations of 401k. The user is only required to input some information and the calculator makes the calculations accordingly.
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