401(k) plans are one of the most popular employer-sponsored retirement plans available. Alongside a reliable means of saving, they also allow for employer matching contributions and introduce a variety of tax-planning strategies.
For many, a 401(k) plan is the most important tool to build retirement savings and support lifestyle needs in retirement, making it essential to understand your Huntington Ingalls 401(k).
Although there are commonalities among 401(k) plans, each employer has leeway in what they offer.
In this article, we will look at the fundamental elements of the Huntington Ingalls 401(k) plan, and how to take full advantage of the plan features.
What is a 401(k) and How Does it Work?
A 401(k) is a tax-advantaged defined-contribution plan sponsored by your employer to facilitate saving and investing for retirement.
Upon its conception, Internal Revenue Code Section 401(k) was enacted to allow deferral of compensation for stock options and bonuses. By the early 1980s, the plans opened up to salary reductions, and companies started to favor 401(k) plans over traditional pensions. Between cheaper maintenance and less company investment risk, 401(k) plans rapidly replaced their defined-benefit predecessors.
Your contributions to the Huntington Ingalls 401(k) are made by salary reduction, also known as elective deferral, which simply means you direct a portion of your salary to the plan instead of receiving it in your paycheck. Generally speaking, elective deferrals can be made on a pre-tax, after-tax, or Roth basis. It’s up to each plan to decide what they offer, and not all options have to be represented.
The mechanics of elective deferral work in your favor. Since contributions are automatically deducted, you don’t have to actively think about them or plan for it. Investing at regular intervals when you get paid is a healthy practice too because the money is immediately invested in the funds you choose, instead of sitting in cash until you decide to contribute. Over several years, compounding returns have the potential to make a significant difference.
Huntington Ingalls 401(k)
Your Huntington Ingalls plan offers each type of contribution, up to 75% of your compensation. Let’s see how it works.