How often can contributions to a 401k be made by employees?

How often can contributions to a 401k be made by employees?

• A. Once a year
• B. Monthly
• C. Per paycheck
• D. Bi-weekly

Answer: (C)

Employees can contribute to a 401(k) plan per paycheck, allowing for contributions to be deducted from each paycheck on a regular basis. This payroll deduction method enables employees to save consistently and take advantage of dollar-cost averaging over the course of the year. By contributing per paycheck, employees can easily manage their contributions as they're directly pulled from their income, making it a convenient and effective way to invest for retirement on an ongoing basis. This flexibility also accommodates different financial situations, as employees can adjust their contribution amounts with changes in their pay or personal circumstances. Annual or less frequent contributions may limit the ability to consistently save toward retirement and take full advantage of employer matching contributions. Therefore, the option that aligns with how contributions are typically structured in 401(k) plans is the ability to contribute per paycheck.

Employees can contribute to a 401(k) plan per paycheck, allowing for contributions to be deducted from each paycheck on a regular basis. This payroll deduction method enables employees to save consistently and take advantage of dollar-cost averaging over the course of the year. By contributing per paycheck, employees can easily manage their contributions as they're directly pulled from their income, making it a convenient and effective way to invest for retirement on an ongoing basis.

This flexibility also accommodates different financial situations, as employees can adjust their contribution amounts with changes in their pay or personal circumstances. Annual or less frequent contributions may limit the ability to consistently save toward retirement and take full advantage of employer matching contributions. Therefore, the option that aligns with how contributions are typically structured in 401(k) plans is the ability to contribute per paycheck.