The 401k retirement plan in the United States
Surely at some point, when we talked about the treatment that should be given to the savings destined for 401k retirement plan, you have heard of the American model that some put as an example to which we should tend to relax the instruments that we can use to build our Complementary pension funds. But really, what is it and how does it work?
What are 401k plans
401k retirement plan exclusively for active employees. Although not all companies offer it, it is customary to do so. It is designed to help the employee save for retirement. It should be remembered that in the United States public pensions are much more limited than in Spain, and therefore more important if it is possible to provide complementary savings during the working life to have a reasonable income when it comes to an end.
401k Plan Operation
The employee determines how much of his salary he wants to invest in his plan account in each pay period. Subsequently, it is the employee who chooses in what type of investment he wants to apply his savings, among several options that will offer his company, although in general are invested in mutual funds. In addition, it is common for companies to make an additional additional contribution in proportion to what the worker contributes, at best 100%, or in the absence of 50%.
That is, if the employee contributes $ 5,000, the company contributes $ 5,000 in the first case, or $ 2,500 in the second, as an incentive in addition to the tax rebate, so that most people contribute to increase their savings to The 401k retirement plan . In fact, it is estimated that 75% of companies complement the contributions of their employees.
Regarding liquidity, if you withdraw money from these plans before turning 59, there is a penalty of 10% of the money withdrawn, in addition to having to report it as income from work. Some offer the option of having liquidity in case of need in similar cases to our pension plans, which is implemented through a loan with guaranteed investment of the plan to avoid the penalty of 10%.
Difference and similarities with pension plans
The first important difference with the pension plans that we know well is that the pension plans can be hired by any, but these American 401k retirement plan can only be hired by the employees. In addition, American plans have a greater variety of forms of investment compared to Spanish pension plans.
As for the similarities, both enjoy a beneficial tax treatment, what it does is delay the tax until the moment we retire.