04/20/2013 08:49 am ET

401(k) Benefits, Drawbacks And Misconceptions (VIDEO)

Many of us have 401(k) plans, but do we actually know how they work?

A recent segment on HuffPost Live addressed the benefits, drawbacks and misconceptions surrounding the retirement savings account, which wasused by 51 million Americans in 2011, according to the Investment Company Institute.

"We're fundamentally misunderstanding what the purpose of the 401(k) is," said Shiyan Koh, the Vice President of Finance at NerdWallet. "If you think you're going to put money in a 401(k) and suddenly it magically increases and turns out money, you will be mistaken."

Koh said that people should ask themselves, "Why would there be free money in a 401(k)? Why would the market suddenly reward me for giving them money?" To hear how much you should be investing, watch the clip above.

Watch the full segment on HuffPost Live.


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