About 401K Interest Rates

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Interest rates for 401ks are dependent upon the money inside the account, as 401ks themselves do not have inherent interest rates. Learn about interest rates as they relate to 401ks with financial advice from an experienced portfolio manager in this free video on investing.

Part of the Video Series: Stocks & Investments
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Video Transcript

Okay, so you're wondering what the interest rate is for a 401K? 401K's don't have an interest rate inherently. 401K is just a tax code, it's a designation to show that that is an account that doesn't get taxed. Any money that you make in the account, you don't have to file that in your tax as well when you file every year. So the 401K itself doesn't have an interest rate, it's just a shell. It's an account that holds other vehicles. The interest rate in your 401K is going to be dependent on the vehicles that are inside the 401K. So the interest rates are going to be determined; say for example in a money market, if you put all your money in a money market inside the 401K and that's making 2%, that would be your interest rate. If it's, maybe you picked some really good mutual funds and those were inside your 401K and they made 10% that year, well, that would be your, your rate of return. But, the 401K itself does not have an inherent rate of return. That's something that, that that you can decide.

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