Answer: A 401(k) retirement plan is a type of employer-sponsored retirement savings account. It allows employees to contribute a portion of their pre-tax income to the plan, which is then invested in a variety of assets such as stocks, bonds, and mutual funds. The contributions and any investment gains grow tax-deferred until withdrawal.

Answer: Investing in a 401(k) for retirement offers several benefits. Firstly, the contributions are made on a pre-tax basis, reducing your taxable income in the present. Secondly, many employers offer matching contributions, which can significantly boost your retirement savings. Thirdly, the investment gains within the 401(k) grow tax-deferred, allowing your money to compound over time. Lastly, 401(k) plans offer automatic payroll deductions, making it easy and convenient to save for retirement.

Answer: The contribution limits for a 401(k) plan can change each year. As of 2021, the maximum contribution limit is $19,500 for individuals under the age of 50. If you are 50 or older, you can make catch-up contributions of an additional $6,500, bringing the total limit to $26,000. It’s important to note that these limits may be subject to adjustment by the IRS in the future.

Answer: While it is generally advised to leave your 401(k) funds untouched until retirement, there are certain circumstances where you may be able to make early withdrawals. These include financial hardships, medical expenses, disability, and certain first-time homebuyer expenses. However, early withdrawals are typically subject to income tax and a 10% early withdrawal penalty, so it’s important to consider the long-term impact before making any withdrawals.