What is a 401(k) plan?

A 401(k) plan is a defined contribution savings plan that allows you to contribute a portion of your salary to a retirement plan account. Because your employer deducts your contributions from your paycheck before taxes, you reduce your current taxable income and pay less in federal income tax right now. Plus, all of your investments grow tax-deferred until you remove money from your account, usually at retirement. Earnings withdrawn before an investor reaches age 59 1/2 may be subject to a 10% Federal tax penalty. Your 401(k) plan may offer investment options through:

• a group fixed and variable deferred annuity, or

• a selection of mutual funds, or

• a selection of bank products, or

• a combination or all three.