401(k) Tax Benefits and Advantages [Video]

The 401(k) is a very popular investment vehicle for retirement planning. Participating individuals gain valuable tax advantages as they set aside a portion of their salaries to their 401(k) accounts with some getting matching contributions from their employers.

As much as $7.2 trillion was held in these plans as of June 2023. More than half of the money invested in these employer-sponsored plans was set aside in mutual funds while the rest was put into other investments.

There are many reasons why investors and retirement savers rely on their 401(k) plans. Let’s take a look at the benefits and advantages of the 401(k).

Named after a section of the Internal Revenue Code (IRC), 401(k)s are employer-sponsored defined-contribution plans (DC) that give workers a tax-advantaged way to save for retirement. If your employer offers a 401(k), you can opt to contribute a percentage of your incometo the plan. The contributions are automatically taken …