In the U.S there is a range of options for retirement packages. One of these is the 401k retirement plan. This is sometimes referred to as a cash or deferred arrangement plan (CODA). This plan has been named after a section of the Internal Revenue Code. This plan means that an employee can make contributions from their salary which can be matched by their employer. There are a substantial amount of companies and non-profit organizations that can use this type of retirement plan for their employees.

The contributions that you make are from your pre-tax amount but the funds in the retirement plan are tax-free until it is withdrawn. Your employer allows you to defer payment of part of your compensation and contributes those funds to your account.

A few of the 401k retirement plans include payments from the employer, usually around the 50% mark. It is also possible to have the choice of a profit sharing plan. Independent payments can be made by an employer as well and linked to a profit sharing plan. Commonly the participant-directed plan is the plan of choice for employees.

Some of the 401k retirement plans allow the chance for the employee to decide where the money goes whether it be to company, stock, the stock market or other types of investment choices.

The 401k retirement plans are regulated by The Employee Benefits Security Administration who is part of the U.S Department of Labor. State government s are not allowed to offer these types of retirement plans to their employees. Qualifying employees of private and tax-exempt companies can benefit from the 401k retirement plans available. It is also possible for those who are self-employed to set up a 401k retirement plan.

The plan has many benefits for the employee. For example, the employee can choose where the funds will be directed to, therefore maintaining full control over their investments. Another advantage is that the employee can make pre-tax payments which means that they pay less tax and get a better salary check. If an employee changes the company they work for then the retirement plan can be moved from their old employer to their new one.

You can take funds out but the rule of thumb is that this is not until you reach the age of about sixty. Be aware that there may be charges incurred for making early withdrawals. There is an option to get a loan or hardship fund which may not incur any tax penalties. Many employers ask for a spouse to sign an agreement to release the funds; this is because they feel that any decisions regarding withdrawal affects partners too. The 401k retirement plans are also covered by pension laws and funds cannot be paid out to creditors or used by anyone else- it is essentially a personal investment plan.

It is advisable to be wary of rollovers relating to the 401k retirement plans. It is recommended that you gain all the information possible on the topic of rollovers before making any decisions.

In short, the 401k retirement plans are one of the best choices available and is a sound way to make sure you have funds to spend when you reach retirement age.