When searching for a retirement savings plan, many people are bewildered with the various choices available. 401k retirement plans are one of these options, and numerous individuals discover that such programs are ideal. The following are some essential facts about this particular retirement tool that many consumers will find helpful:
Providing an income for men and women following their retirement is the purpose of a 401k plan. Such programs are designed to allow both employers and employees to make monetary contributions to the fund on a regular basis. Certain establishments will match the amount contributed by their employees. Others have a preset limit with regard to how much money they will place in the fund on their workers’ behalf.
There are essentially three types of contributions to a 401k plan. These are nonelective contributions, matching contributions and elective contributions. Matching contributions are where an employer matches the amount put into the account each week by the employee.
An elective contribution is pretax money that one chooses to invest into the 401k rather than take the money as bring home pay. Non-elective contributions are employer deposited funds that go into the employee’s account. The latter can not be converted into cash, however. Rather, the amount must go directly into the fund.
There are limitations with regard to the total amount that one can invest into such a plan each year. It is wise for individuals to check with the Internal Revenue Service to get the precise numbers, as they do change from time to time. After a person reaches fifty years of age, he or she is typically allowed to make additional contributions into his or her plan in order to better prepare for upcoming retirement.
When reviewing the various alternatives available, one should carefully consider a 401k option. This is because this particular type of fund is considered relatively safe when compared to riskier options such as independently playing the stock market, or investing in real estate or other tangible items that may lose value over time if certain circumstances occur. Any person who has the option of enrolling in such a plan at work is probably wise to pursue this benefit.
It is wise to enroll in such a plan as early as one can. This is because, as one would suspect, the longer he or she pays into the fund, the more money will be available to him or her when the time has come to stop working. Therefore, if one is searching for a new job, he or she is wise to inquire at all interviews if such a plan is part of the benefits offered by the company.
Virtually anyone can benefit from 401k retirement plans. For this reason, if such a program is offered, employees are wise to accept it and make weekly contributions. Anyone who does not understand how such programs work, and those who have questions about funds of this type should pursue advice from a financial planner. Such individuals are qualified to outline the pros and cons of this investment tool, and offer advice concerning which individuals will enjoy the greatest benefit from retirement plans of this kind.
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