You have just started a new job and are thrilled to learn thatyour new employer offers a 401(k) retirement plan to its employees.Your annual salary is $40,000. Assume the IRS allows you tocontribute up to $24,000 to your 401(k). You’ve decided tocontribute 7% of your annual salary to the plan.
Questions:
- How much more money would you need to contribute to meet themaximum allowable contribution set forth by the IRS?
- The company offers you a $.50 match for each dollar that youcontribute between 2 and 5 percent of your annual salary. How muchis the company match based on your 7% contribution?
- Is this a defined benefit plan or defined contribution plan?Why?
