401K Gold Accounts for the Newly Employed

If you’ve returned to family Thanksgiving or Christmas and had to explain your finances and employment to in-laws, you’ve probably heard the term 401(k) thrown around. A 401K, put simply is a retirement account for your old age income. Although you may be able to work now, eventually you will be unable to do so and 401K accounts provide some level of financial independence even through a jobless retirement.

In the modern climate of finances, a 401K is a pretty sweet addition to a new job. In addition to being super convenient for your own use, allowing you to divert income towards the future quickly and easily, it can also be matched by your employers. If they offer this, the employer will add a certain amount every time you add some from your income. This can add up, quickly, and if they match it 1 to 1 it can easily make the latter half of your life an easy and relaxing experience. But, let’s go further in-depth to find out the different types, different levels, and some other terminology for the uninitiated.

IRAs versus 401Ks

Despite all the fancy terminology created by the financially minded among us, there is a very simple difference between a normal Individual Retirement Account and a 401K. This difference is in who can put money into the account, and when people can take these funds out. An IRA is, put simply, an account for you that is provided by you and can be taken out by you. You put money in and after a seemingly infinite amount of time (It goes by faster than you think), you can take the money out for your own use.

A 401K is through an employer, who puts money in with you, normally taken out of your paycheck every month. This means that the amount put in can theoretically be what you put in matched by whatever deal you have worked out with your employer. If you want to read more about 401Ks and their unique types, click here: and see the many reasons why a 401K is a highly desirable part of saving for retirement.

The Different 401Ks

So, what are the different types of 401Ks for the average consumer? Well, for the most part, semi-skilled work up to highly-skilled positions will probably fall under the umbrella of a traditional 401K. These are as standard as you can get, with the details worked out ahead of time by you and your prospective employer. Most of the time, employer contributions to these accounts are required to be stable for a certain amount of time.

401Ks are by their nature very stable, but a traditional 401K is on the lower end of safeguards against loopholes in contracts. There are many laws that apply to traditional accounts like this that protect the employees of a particular institution from discrimination in contribution matching. So, in general, everyone under the umbrella of a company is going to receive the same level of benefits (speaking broadly, not referring to insurance) as everyone else.

Up The Quality Ladder

There are two other notable types of 401Ks that follow a similar pattern of investment. A safe harbor 401K is notable as the best type of security in terms of government oversight for any particular company or individual. These types of 401Ks often require, by their nature, rules that are often updated in compliance with tax codes and current laws. These accounts are regularly tested to make sure that the financial matches of the employer are effectively equal across the whole company.

Surprisingly, safe harbor variants of this plan don’t require this test, but what they do require is a ton of notice for employers and employees alike to cancel or withdraw the account. Everything in the account is monitored and you receive information regarding the use of the account via written notice. Yes, even in the modern world there are accounts that necessitate real, written, notice in order to be legitimate.

The biggest advantage of this plan is that all employees that participate get a contribution, but there is no guarantee of IRS testing. If you see this plan, chances are that for you as an employee the difference will be negligible. Yet, it is still nice to know when you should check your mail.

Simple And Secure

The final major type of this plan is the SIMPLE plan, which is designed specifically for small businesses that may struggle to create a normal 401K plan. This type of plan isn’t tested for discrimination but is restricted to businesses with under a certain amount of employees. Chances are if you are employed by one of these businesses, working out the details will be something you can do by physically speaking to someone, so the same protections do not apply. You can click here for more succinct information on all of these types from the IRS itself.

Don’t let yourself be tricked into a retirement plan that gives you less than what you expect and need. These types of accounts are usually extremely safe, as with all 401Ks and if you have the opportunity to put into this kind of account chances are you should take it without question. But, as with anything you are expected to sign, read all text applicable. If the document links to another, follow the chain until you know everything you’re signing up for.

The name 401K carries with it a lot of weight among financial circles and often is a sign of the ultimate security of an employer. If they’re willing to pay into a 401K, they want to keep you as an employee. Don’t let their trust be wasted, and make sure that you sign only when you’re sure you could work at that specific job for a long, and happy time. Careers aren’t built overnight, but signing anything can build something you may not want in a single pen stroke, so be safe!

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