How does a 401k invesment plan actually work and are there any risks involved?
Answers: A 401K is a type of retirement plan that employers offer. It is expensive to set up and maintain. Individuals would not set one up for him or herself.
You set aside a percentage or dollar amount of your salary per pay period that you want to contribute for your retirement. This reduces your taxable income. It goes into your 401K tax-free. You will pay taxes when you are retired and start to dip into the fund you set up for yourself. Your employer will likely match (to some degree) what you put in. (say you contribute 10% and your employer matches dollar for dollar up to 4%)
The risks involved depend on the investment vehicles (mutual funds, stocks, etc.) you choose. You can set it up to be highly agressive to stable (money market funds). It will depend on your age and retirement goals.
It is in your best interest to start as early as you can for saving for retirement because time is your friend. The more time you have then the less you have to put aside to reach your goal. (money you would like to have at retirement age)
Stocks outperform all other investment choices for the long-term. In the short-term, they are the riskiest investment.
If you are new to investing and have at least 10 years then I recommend a balance fund to you. It will give you a taste of the different investment choices out there and will grow at a moderate rate. It's a pretty conservative investment choice and recommended for someone new to the investment world.
Edit: Contributing to a 401K will likely reduce your take home pay. You do have the freedom to change the amount you contribute. However, it is recommended that at the very least you do what you need to do in order to max out what your employer offers in terms of matching.
If you take money out of a 401K before retirement age (IRS guidelines) then you will pay taxes and a 10% early withdrawal penalty on the money so be thoughtful about how much you can reasonably contribute without having to ask for the money later. You will take a huge hit financially.
401K is a retirement plan offered by your employer
SInce the Enron situation alot of folks have lost hope
If you do decide to invest in your company's 401K; see if they match and if so then max it out so that you get more on your return
Josie,
There's no risk in the plan itself. There's risk in the investments that the plan makes. These are the same real risks anytime you invest in the stock market.
For details on how the plan works, I'm sure the other answerers will do a good job explaining.
Wats reliance IPO?
dear frnds these days i m seeing contained by mid-day that theres is too much profit people r making by investing within reliance IPO but unable to become conscious how n wats IPO?is it similar to shares?Answers: IPO means Initial Public Offering of shares of a precise company before it is down in the minor market. you can apply but the allotment is not assured.
"Initial Public Offer"
Means offering shares to the public for the first time.
Does our financial system hold backup surrounded by different cities?
If a nuke went past its sell-by date in New York, does the stock exchange and central companies headquarted there hold their systems backed up surrounded by different cities. Could they survive?Answers: Almost every bank, stock exchange and brokerage house have redundant electronic back ups of adjectives their information in two or more locations that are geographically removed from the crucial location. These sites are generally unbelievably secure and hold advanced flood, fire and theft protection. This be in place prior to 9/11 and post 9/11 if they did not enjoy it they do now. Certain public companies are also required by SEC regulations to own data posterior up storage.