What is a 401K?
A 401K is basically a retirement plan where people contribute part of their pre-taxable income into an account that is usually set up by an employer. This type of retirement plan is often one of the perks to working at a large corporation or business because the business will often match a percentage of the funds an employee puts in. It allows you to save towards retirement without having to worry about taxes and it also lowers your take home amount each week so that you are taxed on less money. And everyone likes to save money on their taxes. But with this form of retirement there are some very strict guidelines about how much can be put in at one time and when you can withdraw the money. You also have to worry about changing jobs or losing your job and your retirement fund.

Do employers contribute to employees' 401k?
It is fairly typical for large corporations or employers to contribute some to their employee's 401k plans. They may offer to match the percentage that you put in. This is a fantastic thing because essentially you are getting free money just for investing in your future which you planned to do anyway. But with the economy in such a downturn many employers are finding themselves financially unable to contribute or match their employee's contributions. This can be disheartening but you still need to put the money away yourself even if your employer is not contributing. It is not required by law that any employer, big or small, has to offer you a retirement plan. That is why it is considered part of a "benefit" package.

What happens to my 401K if I leave my job for another?
Luckily you do have some options if you leave one company and go to another. You can always roll your 401K savings into the new company's retirement plan or you can convert it to an IRA. You can also withdraw the money but that should be a last resort option because you will be taxed very heavily. How heavily will you be taxed? You will be hit with about 55% in taxes and fees because you cashed out early before retirement. The ideal situation is that you convert your money over into another retirement fund and do not lose any nor are you heavily taxed as a penalty.

What is the age requirement for a 401K withdrawal without any penalty?
Most 401K's allow you to start withdrawing funds from them without incurring heavy tax penalties once you reach 59 ½. If you begin withdrawing before that they you are going to usually incur a 10% tax penalty on top of the regular tax that is paid each time you withdraw. That makes it an incentive to wait until you are at retirement age before withdrawing money. The longer you can wait the more money you will save. There are exceptions to this rule though. If the person dies, becomes disabled or loses their job a year before or in the retirement year of 55, the additional penalty could be waived.

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