What is the main function of a 401-K plan?

Disable ads (and more) with a membership for a one time $4.99 payment

Prepare for the UCF GEB3006 Career Development and Financial Planning Final Exam. Boost your readiness with key insights, questions, and strategies. Dive into the exam format and expectations to ace your test!

The main function of a 401-K plan is to offer investment opportunities for retirement. This type of employer-sponsored retirement savings plan allows employees to contribute a portion of their salary before taxes are deducted, which reduces their taxable income for the year. The funds in a 401-K plan can be invested in a variety of options, such as stocks, bonds, and mutual funds, with the goal of growing the investment over time to provide financial security during retirement.

Employees can also benefit from potential employer matching contributions, which can enhance their savings even further. The plan is designed primarily to help individuals save and invest for long-term retirement goals, allowing them to accumulate wealth that can be utilized once they retire. The design encourages saving over the long term rather than for immediate needs.