As the title says, how does this work ? Does one simply receive what they put in? For example, if a person has 100k when they retire at 67, does the retirement company choose an estimated year of death and divide the 100k by the number of years? Are there levels, for example if you retire with 100k, you receive this amount a month? Are distributions distributed like social security?
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A 401k is what’s called tax deferred. Meaning your company will put in pre-tax dollars, which can then grow in investment porfolio. You pay taxes on it when you take it out. But the idea is that you take it out when you retire, so no income, and thus are in a lower tax bracket. Also the 401k can grow using pre-tax dollars, and compound interest is a magical motherfucker.
The other common retirement distribution is a Roth IRA. It’s almost like the reverse of a 401k. You put in after tax dollars, but you don’t pay taxes when you take it out, even on the gains. The caveat is there is max yearly contribution limit.
And with both these distributions, it’s possible to take your money out before retirement, but doing so can sometimes cause a penalty or increased tax burden.
As for paying out during retirement, that’s entirely on the onus of the owner. You can take however much you want out, whenever you want. But like mentioned earlier, it can affect taxes owed.
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