There have been many established retirement plans that seek to facilitate the company as well as the employee; however the 401k plan is a unique program which aims at making retirement investments easy, affordable and manageable for the employees. The 401k plan is a retirement plan specifically designed for the corporations in theUnited States of Americawhereby the employees of corporations having 401k options can save funds for their retirement.
The 401k plan is “a defined contribution plan offered by a corporation to its employees, which allows employees to set aside tax-deferred income for retirement purposes, and in some cases employers will match their contribution dollar-for-dollar. Taking a distribution of the funds before a certain specified age will trigger a penalty tax. The name 401(k) comes from the IRS section describing the program.” (‘401(k) Plan: Definition’)
The 401k plans were initially savings oriented investment programs developed for the executives of corporations however they have proved popular not just amongst the management and the senior executives as well as the workers of the corporations. The main reason for popularity of the 401k programs is the increased returns that it provides to the employees as well as the enhanced flexibility that is featured through the investment options. The traditional retirement plans that were used before the 401k plans included the Individual Retirement Plans, however the IRAs were somewhat restricted on the contributions they had and the returns that they provided. Compared to them the 401k plans provide the employees with much higher returns and therefore have been able to gain favorability amongst the employees of corporations.