The money grows over time and can be withdrawn once the employee reaches retirement age.
If you’re interested in starting a 401k, or if you’re just curious about how they work, here are some tips on choosing a company that offers 401ks:
1. Financial Stability
One of the first things to look at when choosing a 401k is the financial stability of the company. The last thing you want is for your company to file bankruptcy and suddenly halt all contributions to employees’ 401ks if they haven’t already been fully funded by employees themselves.
2. Stock Investments As An Option
Many 401ks have a variety of investment options. Look for one that includes stock investments to grow your money over time. These allow you to buy stock in whatever company you choose, and can earn higher returns than other types of accounts if the company does well.
3. Low Fees
Fees can eat into your investment balance if you’re not careful. To avoid this, look for companies with low fees to reduce the amount of money you lose just by having an account.
4. Easy Access
You will need to take money out of your 401k once you reach retirement age, so be sure that it’s easy for you to withdraw or transfer your money. Look for a company that will allow you to do this without too much hassle, or perhaps even offer an early withdrawal option if you need the money sooner.
5. Low Contribution Requirements
Some companies have very high contributions that can be hard for employees to meet on top of their everyday responsibilities. If you’re just starting your career, it can be hard to afford this additional contribution right away, so look for a company that has low or no requirements.
6. Online Access
Your 401k should allow you to easily see your account balance and make contributions online. This will save you time by allowing you to do everything in one place rather than having to call someone every time you want to make a change.
7. Security and Privacy
Be sure that your 401k information is secure and private, and that it won’t be sold or made public in any way. This will ensure that your money stays safe, and no one can hack into your account and withdraw it without permission.
If you’re interested in a 401k, these are just a few of the questions you should ask yourself before signing up for an account.