What Everybody Should Know About The 401k Retirement Plan?
You must have certainly heard about the 401k retirement plan and in all probability you would have saved through making contributions into this plan. However, do you know what makes this plan so special? Here are two properties that make this plan one of the best available contributory funds today.
The Safety Net That The 401k Retirement Plan Provides You
Post retirement period however far away, is a reality and one that needs careful preparation if you want to live your senior years carefree and with financial security. The 401k retirement plan is one such vehicle that could ensure a pleasant journey as well as safe destination. This plan is a hot favorite for most people because it is extremely flexible to your needs. You choose how much to contribute and the company where you work is bound to match your deposit.
The amount that you contribute to this fund is tax exempt which is a great incentive for more savings. For example, if your monthly income is US $4000 and you contribute 20% then you need to calculate your taxes on only US $3200 as the US $800 (20%) is exempt from taxes.
The 401k Retirement Plan Offers You The Freedom To Invest And Grow
One great advantage is that this plan gives you the freedom to choose where you want your money to be invested for the best possible returns. Your choice includes mutual funds, EE saving bonds, company stocks, and bond funds besides others. This makes it possible for you to choose what you think is best for you so you could make the best of your hard earned money.
In case you leave a job and join another, the 401k retirement plans allows you to roll the fund over to the new company's 401k retirement plan so you could continue saving as before. Another great advantage is that you have the freedom to change the amount you contribute to this retirement plan as many times you wanted.
You want to increase it, you can; you want to decrease it, you can. In most cases, companies put a ceiling on the maximum amount you could contribute because the company would also have to contribute the same amount as you for this fund.
This fund is very safe as it is watched by the Employee Benefits Security Administration under the Department of Labor and therefore this is a great deal for you if you want a carefree post retirement life.
The only downside with the 401k retirement plan is that you can not touch your money before you retire or reach retirement age. You could withdraw the money only if you use it for education purpose. If not, you would find yourself facing a huge penalty.
