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An American Funds 401k is usually offered to employees who are employed with large corporations. Depending on which the employee chooses it can be arranged to be a pre-tax deduction or a post tax deduction from the employees payroll. Employees are permitted to decide for themselves how much of their gross income or net income they wish to contribute to their American Funds 401k plan.
This is an offering directly through the employer and employees are not mandated to enroll into the American Funds 401k plan. However, it is a very valuable way for all employees who qualify for the American Funds 401k plan to accept. This is a very valuable and unique way for all employees to save for their future retirement through a deferment plan.
Most corporations will set up a routine to match the funding in the American Funds 401k plan of their employees, but not all corporations offer this matching of benefits. Research your corporation’s rules to see the details of what they offer in the American Funds 401k plan they are currently enrolled.
When you decide on the pre-tax deductions from your payroll account, it is a benefit to you. You will not be taxed on this income until you begin to withdraw the funds upon retirement. Until you retire, your deposits will multiply and accrue over the lifetime of the American Funds 401k plan.
There are a few corporations that will offer their employees who are enrolled in the American Funds 401k plan a stock option. This is an opportunity for the employees to purchase company stock at a set rate, usually with the stipulation that the stocks will be held and not sold for a given amount of years. The standard rule of thumb to hold company stock is seven years.
Some corporations will expect their employees enrolled in the American Funds 401k plan to hold the stocks for a shorter period of time. Though most employees will buy into the American Funds 401k stock option, this is not mandatory. The decision remains with the employee. An interesting feature with the American Funds 401k plan is that the employees may discontinue the addition of funds through their payroll at any time and the American Funds 401k plan will continue to remain viable.
Regular withdrawal of funds by employees who are enrolled in the American Funds 401k is not permitted, but there are a few exceptions to this standard rule. Employees may withdraw funds for a down payment on a new home or request a personal loan. Funds withdrawn from the American Funds 401k for a down payment on a new home gives the employee an option to repay the loan at a lower interest rate over ten years. A request for a personal loan must be repaid in four years, usually through an additional payroll deduction. |
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