the main advantage of a 401(k) plan is that: the employer guarantees a better than market return. there is no required minimum distribution. all distributions are taxed at favorable rate. it allows you to defer compensation from taxation to save for retirement.

A 401(k) plan is a retirement savings plan offered by many American employers that has tax advantages for the saver. It is named after a section of the United States Internal Revenue Code (IRC).

An employee who enrolls in a 401(k) agrees to have a certain percentage of each paycheck paid directly into an investment account. The employer can pay in part or in full. The employee can choose between several investment options, usually mutual funds. 401(k) plans help you reduce your tax burden while saving for retirement. Not only will you get tax benefits, but it will also be hassle free as the payments will be automatically deducted from your salary. In addition, many employers match a portion of an employee's 401(k) contributions, giving them a free boost to retirement savings.

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