Reasons to Open a 401K Plan

You’ve been hearing about it lately in different financial shows: take a 401K and save money for your retirement. But have you ever wondered what’s it all about? Is it completely safe against money launderers, pawn owners, and other untrustworthy people? Here are some reasons why you should opt for 401K.

Easier savings

With 401K, your contributions are automatically deducted from your paycheck. You don’t miss your payments for the savings plan or overspend the money that you have. The 401K is invested in funds that you or your employer chooses. These options are pre-screened so that investment risk is reduced to a certain degree.

Contributing to the plan before getting taxed

You would not be responsible for income tax on your contributions until money is withdrawn. This means you can invest more and could place you in a lower tax bracket.

You choose the amount you want to contribute

You have the option to contribute the amount you feel you can afford to your 401K plan. Do note that the government has provided maximum limits on how much you can contribute.

Your employer would match your contributions

Most employers would match 50 percent of an employee’s 401K contribution. The money immediately goes to you, but the matching contribution from your employer could be subjected to vesting rules. If you should change jobs, your money in your 401K plan can be rolled over to your new employers or to an IRA. This means that your contributions are secured no even if you leave the company.

 

Posted by Ardent Editor on May 12 2008 in 401k & Company Plans

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