which of the following is true about 401(k) plans? select all that apply.
money is set aside for retirement after tax deductions
money is set aside for retirement before tax deductions
all employers match employee contributions
money is deposited directly into the employee's checking account
are there any other answers or just that one?
The true statements about 401(k) plans are:
1. Money is set aside for retirement before tax deductions.
2. All employers match employee contributions.
Therefore, the correct answers are:
- Money is set aside for retirement before tax deductions.
- All employers match employee contributions.
To determine which statements are true about 401(k) plans, let's analyze each option:
1. Money is set aside for retirement after tax deductions: This statement is incorrect. In a traditional 401(k) plan, money is set aside for retirement before tax deductions. Contributions to a 401(k) are typically made on a pre-tax basis, meaning the money is deducted from an employee's paycheck before taxes are calculated.
2. Money is set aside for retirement before tax deductions: This statement is true. As mentioned above, contributions to a 401(k) plan are made before taxes are deducted, allowing the money to grow tax-deferred until retirement.
3. All employers match employee contributions: This statement is not always true. While many employers do offer a 401(k) match, it is not a requirement for all employers or plans. Some employers may not offer any matching contributions, while others may match a certain percentage of an employee's contributions.
4. Money is deposited directly into the employee's checking account: This statement is incorrect. Contributions made to a 401(k) plan do not go directly into an employee's checking account. Instead, the contributions are invested in various funds or investment options offered within the plan.
Based on the analysis, the true statements about 401(k) plans are:
- Money is set aside for retirement before tax deductions.
- Not all employers match employee contributions.
Therefore, the correct answers are options 2 and 3.