Americans can count on the money invested in four common 401(k) plans. Full life savings can be put in a traditional 401(k), a safe harbor 401(k), a SIMPLE 401(k), and an automatic enrollment 401(k).

Savings contributed by the worker add up in all four plan accounts, but turning earnings into money that makes investment gains takes different choices.

Traditional 401(k)

The 401(k) investment plan was made for a worker to use to save a part of their rewards earned at work in an account that will earn money. The traditional 401(k) plans do not necessarily make an employer contribution a part of the investment. There are plans that do. But, employers typically can choose if they are going to make a contribution. These employers can choose a match to the worker's contribution in an amount that is a percentage of their employee's contribution.

An American can use their own values to choose the investment from options and manage the investment. They never have no choice of what to do with their hard earned money.

However, it does typically take several years for an employer's contributions to turn into the worker's money to keep.

Safe Harbor 401(k)

Employers have to make contributions to safe harbor plans. Their contributions immediately become the worker's and can not be taken away. In other words, they are vested. Worker contributions and the earnings vest immediately in all four plans. The tax rules are simpler for these plans than the traditional choice.

SIMPLE 401(k)

A Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is a plan employers have to contribute a matching amount. There are contribution limits for these plans that small business with 100 or fewer employees use.

Automatic Enrollment 401(k)

An employer will automatically begin deducting a worker's contributions and invest the money in an automatic enrollment 401(k) plan. A plan professional invests the money in investments that were already arranged. A worker receives notice that describes how the automatic contributions work and tells them they have a right to change investments. They can choose to opt out of the automatic contributions.

Unique Investment Counts

A unique amount of money will be in hand after 2, 5, or 20 years of work and savings. The choice of a 401(k) plan takes a little work on counting up the future amounts beforehand so the American can know they will have the amount they plan on for later in life. Patient review of the choices can raise future savings.

Source:

Employee Benefits Security Administration, What You Should Know About Your Retirement Plan (October, 2010).