The AI (ChatGPT) Stock Investing Handbook: 401(k) Accounts

Here is the response from ChatGPT for the prompt 401(k) account entered on January 9, 2023.

A 401(k) account is a type of retirement savings plan offered by many employers. It allows employees to contribute a portion of their paycheck to a tax-advantaged account that is used to save for retirement. Employers may also offer to match a portion of their employees' contributions as an added incentive to save.

One of the main benefits of a 401(k) is that contributions are made on a pretax basis, which means that they are deducted from your paycheck before taxes are calculated. This reduces your taxable income and can lower your tax bill in the current year. The funds in a 401(k) account grow tax-deferred until they are withdrawn in retirement, at which point they are taxed as ordinary income.

401(k) plans have contribution limits that change each year. For 2021, the contribution limit is $19,500 for those under the age of 50, and $26,000 for those 50 and over. Some employers may also offer a Roth 401(k) option, which allows employees to make after-tax contributions that grow tax-free and can be withdrawn tax-free in retirement.

It's important to carefully consider your retirement savings options and choose the one that best fits your financial situation and retirement goals.