Tuesday, December 1, 2009

Retirement plans- 401(k) benefits

Posted by Lindsey Connell

A company’s retirement plan may be exactly what you were looking for bit it will not be as beneficial as it seems unless you know how to use it. Many companies provide great benefits but without providing knowledge on how to extend the life of the benefits or how to plan for your retirement properly, you won’t be able to get the most out of what is provided to you. Traditional pensions where employers send retired employees a check every month for the rest of their lives are becoming increasingly rare. As for Social Security, the average benefit is less than $13,000 a year and the future of social security benefits is rocky for the future. 401(k) plans are types of tax-qualified deferred compensation plan where an employee can elect to have their employer contribute a portion of their wages before taxes are taken out. It is important to note that if you withdraw money from your retirement plan before the age of 59 ½, you are subject to an early distribution penalty of 10% additional tax. Retirement may seem like a long ways away but it is important to plan for it early if you want to receive benefits in the future such as free money from your employer, lower taxable income, savings that accumulate without you having to make deposits, and the opportunity to retire knowing that you are financially secure.

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