Advantages of a 401k

Dean's Professional Services presents ADVANTAGES, of a 401k for A great way future security is through an employer-sponsored 401(k) plan. Participating in this type of plan provides you with an opportunity to save for retirement while lowering your tax burden on those savings. you to save toward your own retirement and ensure your TAX-DEFERRED 1. EARNINGS When you contribute a percentage of your pay to a 401(k) plan, you immediately start paying less in taxes. That's because your contribution comes out of your paycheck before income taxes are deducted. Your taxable income is less, which in turn lowers your tax bill. BORROWING 2. FROM YOUR 401k Many plans allow you to borrow from your account for specific reasons, such as buying a primary residence, paying for education or medical expenses, or in case of severe economic hardship. A loan usually must be paid back with REMEMBER! If you leave your employer, you must pay back the entire loan amount within 30 days, or face paying income tax on the unpaid loan amount as well as a 10 interest within five years. The interest you pay goes directly into your percent early distribution penalty if you're under age 59 2. account. INVESTMENT 3. OPTIONS Most 401(k) plans provide a variety of investment vehicles. Each type of investment offers varying degrees of risk and reward potential. Typically, you can mix and match your account balance among the different options available. With many plans, these kinds of changes can be done online, at your convenience. Some Typical Investment Choices V Money market funds V Stable value accounts V Bond mutual funds V Stock mutual funds V Your own company's stock TIMING IS EVERYTHING! The sooner you start saving for retirement, the faster your account will grow. AND - the longer you wait to get started, the harder it will be to catch up. Some experts say that for every five years you delay getting started, you may need to double the amount you must save each month to reach the same level of income at retirement. Sources: http://www.practicalmoneyskills.com/personalfinance/lifeevents/benefits/401kadvantages.php