Hi everyone. Welcome back to the Money Girl Podcast. I'm Laura Adams, the author of the award-winning book Money Girls Smart Moves to Grow Rich.

You've probably heard of a 401k.

It's the most popular type of retirement plan and one of the best benefits that a company can offer its workers.

But I'm sure you won't be surprised to hear me say that a 401k comes with lots of rules and regulations.

Being familiar with how a 401k really works is the best way to make sure you understand all your

options for your retirement money and to stay clear of transactions that could trigger unnecessary

taxes and expensive penalties. So that's what we're going to cover in this show.

Now back to 401k's. A 401k and its sister for nonprofit organizations called a

403b is a retirement plan that you can participate in through your employer.

I'll just be referring to 401k's in the show, but the same rules generally apply to

403b's.

These plans allow you to elect to have your employer contribute a portion of your

paycheck to the account.

When you sign up for a 401k, you receive a menu of investment options to choose from, some of which might be a family of funds,

like Vanguard, Fidelity, or American Funds.

You're responsible for picking investments that are most suited for your risk tolerance and retirement objectives.

Here are 10 important rules about 401k retirement plans that you should know.

Rule number one, contributions must come from payroll deductions.

If you're used to making contributions to an IRA or to a brokerage account like Betterment from your checking or savings

account it may seem a little strange that you can't contribute to a 401k the

same way. The only way you can move money into a 401k is through direct payroll deductions, which are called

elective deferrals.

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