• A 401k plan is offered through an employer. It is a type of savings plan designed to supplement a person's social security benefits when they retire. It is strictly an opt-in benefit that most major employers offer employees.
  
  

The Benefits

• When a 401K plan is offered to an employee, the employer usually matches a portion of the money that goes into the 401k account. Sometimes it can be as much as 50 percent, so in a way this is extra pay the employee gets. The amount that is withheld from the employee's check is up to the individual. It can be anything from one percent up to whatever the company allows.
  
  This money gets invested into stocks or bonds that the employee choose from. Most companies have several option ranging from high-risk, high-yield stocks to very minimal risk bonds. The percent of the 401K money that is invested in the various stocks and bonds depends on the employee's choices, and how much risk they are willing to take to get a return on their money.
  
  In a bad market, high-risk stocks and bonds could be subject to losing money, thus the employee will lose money that he has invested in those particular stocks. The employee should be knowledgeable about what they are investing in, and keep a watchful eye on the plan and the money that is in it.
  
  The money is deducted from the employee's wages tax-free, and no tax is due until the money is accessed at retirement, or withdrawn early. Some companies do allow the employee to "borrow" money from their plan. The employee can only access 50 percent of what is in the 401K plan, and this is paid back weekly, by deducting it from the payroll check. The benefit of this is that the employee is paying back the interest money to their own account instead of paying it to a bank.
  
  

The Disadvantages

• Unsteady market rise and falls may cause the 401K participant to lose a substantial amount of money, if they choose to invest in a high-risk stock. They might hope for substantial windfalls, but may lose money instead.
  
  The 401K participant may be able to take a loan out off the 401K account, if a crisis or need surfaces. The loan will be deducted from the payroll check each week and paid back into the account automatically. The original amount that the employee agreed to have taken out per pay, will also be deducted, so there could be a substantial amount taken from the paycheck, before the employee ever gets their money.
  
  

Leaving the Employer

• What if you have invested in a 401K through your employer, and now wish to change jobs? How much of the 401K you get to take with you, will depend on how long you have been with your current employer. You will get to keep everything you have paid in out of your payroll deductions, but you may not get to keep the percent that your employer matched you on.
  
  That depends on the individual employer, and how long you have been with that company. Businesses have set years to consider their employees vested into the company. If you have not been there for a certain amount of years, you may not get to take their portion with you.
  
  If considering applying for the 401K program with your company, make sure you are aware of your company's policy as far as contribution matches and vesting in the company. If you plan to stay with this company or business until you retire, it won't matter. If you are considered a "job hopper" and do not stay with an employer long, a 401K may not work well for you.