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By Tim Renolds
When you are planning for your retirement, a 401K plan is a
good place to start. This a very special account that you fund
with pre-tax earnings and is deducted from your paycheck each
pay period. These funds are then invested in a variety of
bonds, mutual funds, and stocks, and no taxes are charged upon
it until the funds are withdrawn from the account. Congress
created this in the early 1980’s and is used as a vehicle for
saving for retirement. There are many benefits of a 401k plan
that can make an excellent financial net when it comes time to
retire. Some of the advantages include, tax, match programs
initiated by employers, the flexibility to customize your
investments, portability, and the ability to withdraw for a
loan or hardship cases.
Most employers match a portion of the employees 401K
contribution as a appealing factor of keeping employees. Some
employers will even increase the amount of their match when
the
employee works for them for so long, it all depends on the
company. It is of your best interest to invest the maximum
amount you can to the 401K to fully benefit from this program.
Additionally, the 401k plan allows you to customize your
investments and are flexible in this manner as well.
One very flexible and appealing option of the 401K plan is the
fact that if you decide you change employers you have a
variety
of options available to you. These options include, leaving
the
401K plan with the employer you are leaving, the
administrators
could begin to charge you money for keeping the records and
managing your account. You also have the option of rolling
over
your 401K to your new employers 401k plan. You could also do
the
rollover and put it into an IRA. This will allow you to
control
the allocation of your assets meaning you are not limited to
only what your employer provides. Your last options is to cash
out, pay the taxes, plus a possible penalty fee.
It is important that you investigate all options and properly
weigh the pro’s and cons of each, this will help you to make
informed, educated, and practical decisions that will benefit
you and your future retirement. After working hard all of your
life, many people like the comfort of knowing that when they
retire they will have some sort of financial backing to help
them out.
About The Author: Tim Renolds is a wirter for the
www.loan-source.co.uk website. Tim enjoys writitng on
many finance related subjects.
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