A 401(k) is a type of retirement savings account in the United States, which takes its name from subsection 401(k) of the Internal Revenue Code (Title 26 of the United States Code). A contributor can begin to withdraw funds after reaching the age of 59 1/2 years. 401(k)s were first widely adopted as retirement plans for American workers, beginning in the 1980s. The 401(k) emerged as an alternative to the traditional retirement pension, which was paid by employers. Employer contributions with the 401(k) can vary, but in general the 401(k) had the effect of shifting the burden for retirement savings to workers themselves. In 2011, about 60% of American households nearing retirement age have 401(k)-type accounts .
Employers can help their employees save for retirement while reducing taxable income under this provision, and workers can choose to deposit part of their earnings into a 401(k) account and not pay income tax on it until the money is later withdrawn in retirement. Interest earned on money in a 401(k) account is never taxed before funds are withdrawn. Employers may choose to, and often do, match contributions that workers make. The 401(k) account is typically administered by the employer, while in the usual "participant-directed" plan, the employee may select from different kinds of investment options. Employees choose where their savings will be invested, usually, between a selection of mutual funds that emphasize stocks, bonds, money market investments, or some mix of the above. Many companies' 401(k) plans also offer the option to purchase the company's stock. The employee can generally re-allocate money among these investment choices at any time. In the less common trustee-directed 401(k) plans, the employer appoints trustees who decide how the plan's assets will be invested.
The Colorado Enrollment and Salary Deferral Agreement is a legally binding contract between an employer and employee in the state of Colorado. This agreement outlines the requirements and conditions for enrolling in an employer-sponsored salary deferral program. It allows employees to defer a portion of their salary on a pre-tax basis to various retirement savings plans, such as 401(k), 403(b), or 457 plans. The purpose of the Colorado Enrollment and Salary Deferral Agreement is to provide employees with an opportunity to save for retirement while enjoying certain tax advantages. By deferring a portion of their salary, employees can reduce their current taxable income, potentially allowing for greater long-term savings growth. Keywords: Colorado, Enrollment and Salary Deferral Agreement, employer-sponsored, salary deferral program, pre-tax basis, retirement savings plans, 401(k), 403(b), 457 plans, tax advantages, taxable income, long-term savings growth. Types of Colorado Enrollment and Salary Deferral Agreements: 1. Traditional 401(k) Agreement: This agreement allows employees to defer a portion of their salary to a traditional 401(k) retirement plan. Contributions are made on a pre-tax basis, meaning they are not subject to income tax until withdrawn during retirement. 2. Roth 401(k) Agreement: This agreement is similar to the traditional 401(k) agreement but allows employees to make after-tax contributions to a Roth 401(k) retirement plan. Withdrawals from a Roth 401(k) account are typically tax-free during retirement. 3. 403(b) Agreement: This agreement is specifically designed for employees of certain tax-exempt organizations, such as educational institutions, hospitals, or non-profit organizations. It allows employees to defer salary on a pre-tax basis to a 403(b) retirement plan. 4. 457 Agreement: This agreement is intended for employees of state and local governments or certain tax-exempt organizations. It enables employees to defer a portion of their salary on a pre-tax basis to a 457 retirement plan. These various types of agreements provide employees with flexibility and choice in selecting the retirement savings plan that aligns with their financial goals and circumstances. Keywords: Traditional 401(k), Roth 401(k), 403(b), 457, tax-exempt organizations, after-tax contributions, pre-tax basis, retirement plan, financial goals, flexibility.The Colorado Enrollment and Salary Deferral Agreement is a legally binding contract between an employer and employee in the state of Colorado. This agreement outlines the requirements and conditions for enrolling in an employer-sponsored salary deferral program. It allows employees to defer a portion of their salary on a pre-tax basis to various retirement savings plans, such as 401(k), 403(b), or 457 plans. The purpose of the Colorado Enrollment and Salary Deferral Agreement is to provide employees with an opportunity to save for retirement while enjoying certain tax advantages. By deferring a portion of their salary, employees can reduce their current taxable income, potentially allowing for greater long-term savings growth. Keywords: Colorado, Enrollment and Salary Deferral Agreement, employer-sponsored, salary deferral program, pre-tax basis, retirement savings plans, 401(k), 403(b), 457 plans, tax advantages, taxable income, long-term savings growth. Types of Colorado Enrollment and Salary Deferral Agreements: 1. Traditional 401(k) Agreement: This agreement allows employees to defer a portion of their salary to a traditional 401(k) retirement plan. Contributions are made on a pre-tax basis, meaning they are not subject to income tax until withdrawn during retirement. 2. Roth 401(k) Agreement: This agreement is similar to the traditional 401(k) agreement but allows employees to make after-tax contributions to a Roth 401(k) retirement plan. Withdrawals from a Roth 401(k) account are typically tax-free during retirement. 3. 403(b) Agreement: This agreement is specifically designed for employees of certain tax-exempt organizations, such as educational institutions, hospitals, or non-profit organizations. It allows employees to defer salary on a pre-tax basis to a 403(b) retirement plan. 4. 457 Agreement: This agreement is intended for employees of state and local governments or certain tax-exempt organizations. It enables employees to defer a portion of their salary on a pre-tax basis to a 457 retirement plan. These various types of agreements provide employees with flexibility and choice in selecting the retirement savings plan that aligns with their financial goals and circumstances. Keywords: Traditional 401(k), Roth 401(k), 403(b), 457, tax-exempt organizations, after-tax contributions, pre-tax basis, retirement plan, financial goals, flexibility.
