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Dollars and Sense: 401(k) Challenge
by Staff
401(k)plans are one of the most widely used retirement plans. How much do you know about managing yours? Take this quiz to find out.

What happens to the money you contribute to a 401(k)?

  • It goes straight to your employer as an investment in your company.
  • It's put into investments of your employer's choice.
  • A third party administrator offers you a choice of investments to put your money into.

Which of the following isn't a feature of a 401(k) plan?

  • Contributions are taken from your pre-tax income.
  • You can withdraw from your account at any time without penalty.
  • Your employer may opt to match your contribution as an incentive for you to invest.

What age must you reach before you can draw from your 401(k) account without having to pay a penalty?

  • 55.5
  • 59.5
  • 65.5

When changing jobs, which of the following is usually the least desirable option?

  • rolling your money over into a new retirement plan
  • keeping your money in your former employer's 401(k) plan
  • cashing out

As a general rule of thumb, if you're young and both the economy and your job are stable, you should invest:

  • aggressively
  • conservatively
  • not at all -- you'll do fine without it

401(k) plans are part of a family of retirement plans known as:

  • pension contributions plans
  • defined benefit plans
  • defined contribution plans

Which is not an existing incentive for employers to offer 401(k) plans?

  • The administrative costs are tax-deductable.
  • Companies get a portion of their employees' investment yield.
  • It encourages recruitment of quality employees.

What is a top-heavy 401(k) plan?

  • a plan where your employer matches increasingly more cents on the dollar the more you contribute
  • a plan that invests heavily in large-cap funds
  • a plan where a large percentage of a company's overall contributions are for key employees

What is a vesting schedule for 401(k) plans?

  • a tiered schedule for what percentage of your income you can contribute
  • a tiered schedule for when money the employer contributes to your account is actually yours
  • a tiered schedule for the penalty you have to pay depending on your age

Which of the following funds are associated with being risky but possibly returning high investment returns?

  • small-cap funds
  • mid-cap funds
  • large-cap funds