Question

question 3 of 6
what does it mean when the money in your 401(k) is vested?
select a response.
you can keep the money your employer contributed, even if you leave your job.
you will not have investment gains in your employer - sponsored retirement plan.
you will never have to pay taxes on your employer - sponsored retirement plan.
you can withdraw your money at any time without a penalty fee from the irs.

Explanation:

Vesting in a 401(k) refers to the process by which an employee gains full ownership of employer - contributed funds. If an employee leaves the job before full vesting, they may forfeit some or all of the employer - contributed amounts. Once vested, the employee can keep the employer - contributed money even if they leave the job.

• The second option is incorrect because vesting has no relation to investment gains. Investment gains are based on the performance of the investments within the 401(k) plan.
• The third option is wrong. Taxes on 401(k) plans (both employee and employer contributions) are deferred, not eliminated. When withdrawals are made (usually in retirement), taxes are paid on the distributions.
• The fourth option is incorrect. There are generally penalties for early withdrawals (before age 59.5) from 401(k) plans, and vesting does not change this rule. Vesting is about ownership of employer - contributed funds, not withdrawal penalties.

Answer:

You can keep the money your employer contributed, even if you leave your job.