Since 1982, taxpayers have been able to set aside portions of their earnings as retirement investments in a 401(k) plan. http://money.howstuffworks.com/personal-finance/financial-planning/401k1.htmThese plans are generally provided by an employer and allow employees to have payroll deductions to contribute funds into these accounts. 401(k) deductions are pre-tax which means that the funds are distributed before they are taxed, allowing more of the employees earnings to be invested. Many plans have generous limitations for contributions such as up to 15 percent of the employees earnings.http://money.howstuffworks.com/personal-finance/financial-planning/401k1.htm Also, employers can not only contribute a matched contribution but can also provide profit sharing funds to be added to the investment account.

401(k) rules and regulations are governed by the Employee Benefits Security Administration of the U.S. Department of Labor. This department ensures that the investment plans are being managed appropriately and that policies and regulations are properly followed. http://invest-faq.com/articles/ret-plan-401k.html

Employer managed 401(k) plans may have restrictions placed upon them such as the eligibility requirements for investment or the restrictions that are placed on withdraws. Some companies may require an employee to be fully vested prior to employer contributed funds being available to them, should they leave the company. This means that there is a specific length of time the employee must remain with the company before they are 100 percent vested. Other companies may allow employee to be 100 percent vested from the time they begin contributing to their 401(k).http://money.howstuffworks.com/personal-finance/financial-planning/401k2.htm

• 401(k) funds that are not rolled over into another investment account are subject to a 20 percent tax penalty. If the funds are not deposited into an account within 60 days they are subject to an additional 10 percent penalty.http://invest-faq.com/articles/ret-plan-401k.html

• Some employers may allow employees that leave the company to keep their funds invested in the company's 401(k) plan. Others may require that the funds be paid out or rolled over. Fees may be assessed to accounts that are not settled within a specified time frame.http://invest-faq.com/articles/ret-plan-401k.html

• Many 401(k) plans have provisions that allow early withdraws in the form of a loan which is paid back to the account, most times with a very low to zero interest rate.http://invest-faq.com/articles/ret-plan-401k.html

• In 2010, the maximum amount that can be contributed to a 401(k) is $16,500http://www.irs.gov/retirement/participant/article/0,,id=151786,00.html

• For participants over 50, catchup contributions are allowed to permit them to add additional funds to their retirement account. http://www.irs.gov/retirement/participant/article/0,,id=151786,00.html

The content in this page is not a substitute for professional financial advice. Please contact a finance professional before using the information presented here.