Which of the following is true about 401(k) plans? Select all that apply.

Question

(1 point)
Responses

money is set aside for retirement after tax deductions
money is set aside for retirement after tax deductions

money is set aside for retirement before tax deductions
money is set aside for retirement before tax deductions

all employers match employee contributions
all employers match employee contributions

some employers match employee contributions
some employers match employee contributions

money is deposited directly into the employee’s checking account
money is deposited directly into the employee’s checking account
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Answer 1

Here are the true statements about 401(k) plans from the options provided:

1. Money is set aside for retirement before tax deductions - This is true for traditional 401(k) plans, where contributions are made with pre-tax dollars.

2. Some employers match employee contributions - This is also true; many employers offer matching contributions to encourage employee participation in their 401(k) plans, but not all employers do.

The following statements are false:

• Money is set aside for retirement after tax deductions - This is true for Roth 401(k) plans, but not for traditional 401(k) plans.

• All employers match employee contributions - This is false since not all employers provide matching contributions.

• Money is deposited directly into the employee’s checking account - This is false; 401(k) contributions are typically deposited into the retirement plan account, not directly into a checking account.

So, the selections you should make are:

• Money is set aside for retirement before tax deductions
• Some employers match employee contributions