Question

question 1
what does it mean when the money in your 401(k) is vested?
○ 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:

To determine the correct answer, we analyze the concept of vesting in a 401(k):

• Option 1: Vesting in a 401(k) means you own the employer - contributed funds, so you can keep them even if you leave the job. This aligns with the definition of vesting.
• Option 2: Vesting has nothing to do with investment gains. Investment gains depend on the performance of the investments in the 401(k) account, so this option is incorrect.
• Option 3: Taxes on 401(k) funds are still applicable in many cases (e.g., when withdrawing in retirement, depending on the type of 401(k)). Vesting does not eliminate tax liability, so this option is wrong.
• Option 4: IRS penalty - free withdrawals from a 401(k) are generally only allowed under specific circumstances like reaching 59.5 years old, disability, etc. Vesting does not mean you can withdraw at any time without penalty, so this option is incorrect.

Answer:

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