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The 410K Retirement Plan Essay Sample

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The 410K Retirement Plan Essay Sample

This is a personal account which is usually funded by deductions made on the pre-tax earning of an employee. From the deductions, such funds would then be diverted in financing for investment capital in a broad array of assets. These include bonds, capital stocks and also mutual funds. The funds will not have tax levy for their capital gains, interests or even dividends till their maturing time for withdrawal. Its creation was in 1981 by Congress.

            Either, this plan is allied to some subjective benefits which provide an employee compensation advantages. Firstly, the plan enjoys a tax-free advantage from its investment benefits such as the dividends, gains from capital, above the interests on such capital which is never taxed till their disbursement. They also salvage a differed compound tax. Elsewhere, the plan can match the will of a broad array of employers. From their earnings, the employees can adequately choose the correct amount of contribution from the total earnings of these employees. The scheme is never time or amount constrained but the choice of its nature is depended upon the organization and its employees. (http://beginnersinvest.about.com/)

            Through the plan, the employees enjoy the sovereignty in the choice of broad investment choices. This is due to the nature of the investment market which is endowed by many choices of investment assets and opportunities. Diversity in the investment choices diversifies the risks of employees’ risks. Elsewhere, since the plan is used to finance for assets investment, it reduces the risks of employees handling of huge liquid cash which may include embezzlement, theft above other risks.

The employee money is otherwise safer in asset investment than when held in liquid cash at banks or personal deposits. Also, other charges are allied to holding of cash like higher taxation, which is vulnerable through asset investment. Lastly, the employee has an access of money during his/her retirement. Such money can then be reallocated to the most adequate use or investment purpose by the employee after retirement. The 410K Retirement plan is a motivating scheme that ignites the interest of workers in their working positions. (http://beginnersinvest.about.com/)

Reference

Introduction to the 401k Retirement Plan. Retrieved on 13th March 2008 from,   http://beginnersinvest.about.com/

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