401(k) Plans - Part I

Few companies offer traditional pension plans to their employees these days. The expense of offering a pension plan is prohibitive and it puts the company at a disadvantage compared to companies that do not offer employees a pension.

Gone are the days of our fathers and grandfathers who would stay at the same company for 40 years and then retire to collect their pension and a gold watch. Today we are largely left to fend for ourselves come retirement. Fortunately we have something previous generations didn't: the 401(k).

A 401(k) plan is a company-sponsored retirement plan that allows employees to save money on a pretax basis. The money saved can then be invested into an array of stocks, bonds, and mutual funds where the balance will grow tax-free until it is withdrawn.