Many people have started looking into 401(k) as a means to invest for retirement. Getting a 401(k) enables you to get closer to your retirement dreams and the lifestyle you wish to achieve. A 401(k) could be one of the best retirement saving plans that can help you build a secure and safe future. The earlier an employee gets onboard on this saving plan, the higher reward they yield when they retire. Without further ado, let’s delve into the topic and explore 401(k).
What is a 401(k)?
401(k) is a type of retirement plan that is offered by numerous American employees. In this contribution plan, the employee has the liberty to decide how much amount they would like to contribute to their retirement plan each month. The name of the insurance plan originates from the section of IRC that looks after these plans. The employee agrees to a fixed percentage cut from the salary to start saving for retirement.
The amount in the 401(k) savings plan is taken out before the taxes are applied. This results in low taxes on your overall income. The allocated amount is then invested in mutual funds, stocks, and other investments. These investments grow over time and yield a healthy return.
There are two types of 40(k) plans which include:
Roth 401(k) Account
With a Roth account, you have the opportunity to pay taxes now rather than later. All your savings will be taxed, but you won’t have to pay taxes in the future when withdrawing your money.
Traditional 401(k) Account
With the help of a traditional account, you can save your taxes now and pay them later on withdrawals. This helps you make a healthy investment into your retirement savings account.
Why should you get a 401(k) plan?
There are numerous advantages of this plan. One of the things that stand out is that by allocating a small amount now, you can make healthy returns in the future.
You are in Control
With the help of this plan, you can determine the exact amount you wish to invest. It can be as low or as high as you want. However, it should be within the IRC borderlines.
The more time you allocate to the plan, the higher the returns. The plan also offers compound interest, where you will get not only a return on your investment but also the accumulated interest.
With a 401(k) plan, you won’t need to worry about switching or quitting a job. All of the money that you have invested remains intact and is available for you.
In the traditional plan, you can avoid any tax cut on your savings and also pay fewer taxes on your income. The Traditional 401(k) plan is still one of the most common among retirement saving plans.
It can be hard to decide whether you need the 401(k) retirement plan or not. Therefore, it is important to get financial advice from qualified people that are well-versed in the subject. At AFBN, we offer financial consultation to help you make the right decision. Reach out to us now! Toll-Free (866) 729-7845, Fax (702) 489-4254. We look forward to serving you.