which of the following is true about 401(k) plans? select two that apply.
money is set aside for retirement after tax deductions
money is set aside for retirement before tax deductions
a employers match employee contributions
money is deposited directy to the employee's checking account
The two statements that are true about 401(k) plans are:
1) Money is set aside for retirement before tax deductions.
2) An employer may match employee contributions.
To determine which of the options are true about 401(k) plans, let's go through each option:
1. Money is set aside for retirement after tax deductions: This statement is not true. In 401(k) plans, money is set aside for retirement before tax deductions. This means that contributions are made from pre-tax income, and taxes on the contributions and any investment gains are deferred until the funds are withdrawn during retirement.
2. Money is set aside for retirement before tax deductions: This statement is true. As mentioned above, contributions to a 401(k) plan are made from pre-tax income, allowing individuals to reduce their taxable income in the year of the contribution.
3. An employer matches employee contributions: This statement is true. Many employers offer a matching contribution as part of their 401(k) plan. This means that for every dollar the employee contributes, the employer will also contribute a certain amount, up to a certain percentage or limit. The matching contribution is an attractive benefit that can help boost retirement savings.
4. Money is deposited directly to the employee's checking account: This statement is not true. Contributions made to a 401(k) plan are not directly deposited into the employee's checking account. Instead, the funds are contributed to the 401(k) plan account, which is usually managed by a financial institution or investment company.
Based on the explanations provided, the two true statements about 401(k) plans are:
- Money is set aside for retirement before tax deductions.
- An employer matches employee contributions.
The two statements that are true about 401(k) plans are:
1. Money is set aside for retirement before tax deductions.
2. Employers may match employee contributions.