Imagine you are just starting your career. You’ve landed a great job with a respectable company, and they offer you a 401(K) plan. You may be wondering what a 401(K) is and whether or not you should participate. Here are 10 things young employees should know about their 401(K):
- A 401(K) is a savings plan that allows you to save money for retirement: 401(K) stands for 401(k) plan. It’s a savings plan that allows you to save money for retirement. The money you contribute is tax-deductible, and the earnings grow tax-deferred.
- You can choose how much to contribute: You decide how much money to contribute to your 401(K) plan each month. This contribution will come out of your paycheck before taxes are taken out, so it reduces your taxable income.
- Your employer may match your contributions: Many employers offer matching contributions, which means they’ll contribute an equal amount to what you contribute. This is free money, so be sure to take advantage of it!
- You can access your 401(K) funds at any time: One of the great things about a 401(K) plan is that you can access your funds at any time. This allows you to have some flexibility if you need to withdraw money for an emergency.
- You can’t touch the money until you’re 59 1/2: However, you will incur a penalty if you withdraw money before 59 1/2 years old unless you meet one of the exceptions.
- 401(K) plans offer a variety of investment options: When you open a 401(K) account, you’ll be given a list of investment options to choose from. These options include stocks, bonds, and mutual funds.
- You can change your investment options whenever you want: Don’t like the investment options you’ve been given? No problem! You can change them at any time. This gives you the flexibility to choose the investments that best suit your needs.
- 401(K) plans are portable: If you leave your job, you can take your 401(K) plan with you. This is great if you decide to switch jobs or retire early.
- 401(K) plans are flexible: As mentioned earlier, 401(K) plans offer a lot of flexibility. This includes the ability to borrow money from your account if needed.
- Funds in a 401(K) can be used to purchase a home or pay for education expenses: One of the best things about 401(K) funds is that they can be used for a variety of purposes. You can use them to purchase a home or pay for education expenses. Even if you don’t use them for these purposes, they will still grow tax-deferred.
401ks can be confusing, but with a little knowledge you can make the most of this valuable benefit. By understanding these 10 things, young employees can start their 401k plan on the right foot and set themselves up for a comfortable retirement.
If you have any questions about 401(K) plans, Bethany Insurance is here to help. They offer free consultations so you can learn more about 401(K) plans and how they can benefit you. For more information, visit Bethany Insurance online today at www.bethanyins.com or give them a call at 909-414-1877.