What does this mean and how do fractions come into the scenario.?

Question

You are newly hired at ACME Construction Co. They have a 401K plan. The HR department wants to know your 401K allocation.

Answer 1

Most people would refer to the allocation of funds within a 401K plan as *percentages*, rather than fractions, but it means the same thing -- you decide what percentage of your investment you want to put into high-risk funds, medium-risk, safe, etc. Since all percentages are just a fraction in the form of x/100, there's your answer.

What's up with all the questions about fractions, anyway? In my experience, fractions are an elementary-school math lesson, but you're asking college-level questions here. I don't get it.

Answer 2

Most 401k plans offer several different types of investments.  You might have bonds, growth stocks, international, etc.  What they are asking is what percentage do you want to allocate (put into) each different type.  Your total needs to equal 100%.  Example:  25% in bonds, 25% in growth stocks, & 50% into international.  You want to have a good variety/mix.  Hope this helps!

Answer 3

A 401K plan is a plan where pretax and/or aftertax income is taken out of your paycheck and invested in a variety of funds.  The percentage taken out is your choice - up to 7% pretax.  Let's say you make $1000/week.  You choose 2% to go into your 401K - that would be $200/week.  Of that $200 going into your 401K plan, you need to tell the administrator how you want your fund distributed - could be 20% into 5 different funds, or 50% into 2 different funds, or 100% into one fund - that is your choice as well.