401(k) Features, Core Funds and Self-Directed Accounts (SDA)
Traditional and Roth 401(k)s A 401(k) is an employer sponsored plan designed for you to save money for retirement. There are two types of 401(k)s, traditional and Roth. A traditional 401(k) allows pre-tax dollars to be contributed. These funds grow tax deferred, meaning you do not pay taxes until the money is withdrawn. A Roth 401(k) is where you contribute after-tax dollars. Again, the funds grow tax deferred, however, you can withdraw the funds tax free. In the traditional, you pay the taxes at the end. In the Roth, you pay the taxes in the beginning. The plan that is best for you, depends on many factors. Matching Benefit Aside from the benefit of saving for retirement, there are other benefits. One such benefit is your employer may have a matching program. This is where your employer may contribute, or match, some or all the money you contribute. This is like getting free money! Of course, all plans differ, so here is an example to explain how it may work.