Many American employers offer 401(k) plans as a means of providing tax advantaged savings opportunities to their employees. If you are interested in offering your employees a 401(k) or if you yourself are considering enrolling in one, now’s a good time to learn more about them. 


Here’s everything you need to know about 401(k) plans.

What is a Fiduciary?

Our trusted advisors are Fiduciaries. A Fiduciary Financial Advisor has the legal duty to make investment recommendations with your best interest in mind, while other advisors who may not be a Fiduciary may recommend products for which they receive a commission or other form of payment.

What Is a 401(k)

A financial plan is a set of documents that contain a person’s current financial information and long-term monetary goals. The plan also includes strategies that can be used to achieve those goals. Financial plans can be produced independently, but people often seek assistance in the process. That’s why companies like American Family Solutions offer full-service financial planning to their customers. 

Types Of 401(k) Plans

There are two main 401(k) plans that you must choose from; traditional and Roth. Here’s more about each one.

Traditional 401(k)

When employees make contributions to their 401(k), these contributions are deducted from their gross income. Therefore, the money comes from the employee’s payroll before income taxes have been deducted from the amount. With this setup, employee’s taxable income is reduced by an amount equaling the total contributions you’ve made.

Roth 401(k)

With a Roth 401(k), your contributions are deducted from after-tax income. This is unlike traditional 401(k) plans, which have taxes deducted from the gross income. There is no tax deduction in the year of contribution, but when the money is withdrawn during retirement, no additional taxes are due on employee contributions and investment earnings.

Which 401(k) To Choose

Which 401(k) plan is best for you depends on your unique circumstances. To find out which is most appropriate for your situation, it is best to speak with a financial advisor. Though, not all employers offer both plans, so make sure you are aware of what 401(k) options are available before calling.


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A financial planner can help you prepare for a financially comfortable life in retirement. To get the best out of your retirement, please call American Family Solutions today. We can help you get started with a free consultation.