401 (k) is a type of retirement plan sponsored by the employer, adopted in the United States and other countries, whose name is linked to the section of the U.S. Tax Code, which is expected. A 401 (k) enables savings due to tax exemption (within a maximum annual savings).
Withdrawals can be made and the plan may be liquidated at any time before the age limit (59,5 years). There are also opportunities for borrowing based on funds placed into a 401 (k).
The investor may leverage its capital from the age of 59,5 years. In the case of employees, you may choose to have a portion of your income directly paid to the 401 (k), or voluntarily pay money on the plan, as do the self-employed.
In general, the plan consists of applying the money that should be withheld for income taxes. For this mode, the employee is not discounting for the payment of tax, but headed for a specific financial application, which does not suffer even when no fee is effectively removed.
Many companies offer their employees the option to purchase shares, but the most popular route is the establishment of mutual funds focused on investing in the stock market, government bonds or money market accounts, or a mixture of these investments.
From January 1, 2006 the Roth 401 (k) account was created, whereby the money deposited shall be bound to the payment of income tax, such that profits from its application will not suffer in the end. Applications made outside the Roth account are taxed as normal income.
The 401 (k) can basically belong to two forms: first, the employee remains in control of the type of application he prefers, it can reallocate resources, in a less common form is the employer appoints administrators, to decide how assets will be invested plan.
It is widespread in the United States, and there are similar plans in a number of other countries such as Canada or Australia. Investors are free to choose how their capital is invested. They often delegate their savings to mutual funds or pension funds which means that their retirement savings are invested in equities or bonds.
In most large publicly traded companies, employees may subscribe for shares in the company they work under the values of retirement savings. In some cases, this system proves highly profitable (for employees of Microsoft, for example), in others it can lead to tragic situations (such as employees of Enron, which went bankrupt in 2001).