Post By: Dana Sunderlin
In today’s economy, it is more important than ever that you plan ahead for your retirement. Traditional pensions are becoming increasingly rare and social security, which represents 80 percent or more of the income for retirees, has decreased to less than $13,000 a year. As a result, your best way to initiate your retirement plan is to start saving and investing now, in accounts such as a 401(k).
A 401(k) is a plan established by your employers, which allows you to make salary reduction contributions on a post-tax or pretax basis. These plans often allow employees to direct their own investments, but often contain restrictions on when they can withdraw the money and implement penalties if the money is taken out before they reach “retirement age.”
Employees who choose to participate in these plans do so for many reasons, including that they receive “immediate tax savings on contributions, tax-deferral of any investment earnings, in-service loans and withdrawals, and free money.” As good as all of those incentives sound, free money is clearly the most appealing. The way that a 401(k) can get you free money is that many employers who participate in these plans match a portion of the money deferred by their employee. If your employer is matching contributions dollar for dollar, then you are doubling the amount of money being put away for your retirement. It’s as easy as that!
The most important thing about investing in a 401(k) for your future is that you start now! If you begin investing early enough, such as at the age of 25, you can easily have a million dollars, if not more, in the account by the time you are ready to retire.
A 401(k) is a plan established by your employers, which allows you to make salary reduction contributions on a post-tax or pretax basis. These plans often allow employees to direct their own investments, but often contain restrictions on when they can withdraw the money and implement penalties if the money is taken out before they reach “retirement age.”
Employees who choose to participate in these plans do so for many reasons, including that they receive “immediate tax savings on contributions, tax-deferral of any investment earnings, in-service loans and withdrawals, and free money.” As good as all of those incentives sound, free money is clearly the most appealing. The way that a 401(k) can get you free money is that many employers who participate in these plans match a portion of the money deferred by their employee. If your employer is matching contributions dollar for dollar, then you are doubling the amount of money being put away for your retirement. It’s as easy as that!
The most important thing about investing in a 401(k) for your future is that you start now! If you begin investing early enough, such as at the age of 25, you can easily have a million dollars, if not more, in the account by the time you are ready to retire.
Sources:
No comments:
Post a Comment