Video helping you to understand what a 401(K) retirement plan consists of. The deal:
401k plans are a tax-advantaged retirement plan offered by employers, basically, you set aside a portion of your salary and put it in the 401k account investing in stocks, bonds, ETF’s, indexes, etc and the money grows tax-free until you withdraw it around the age of 66 at which point you will be in a lower tax bracket and therefore have to pay less in taxes on your accumulated retirement savings. Other benefits include good employers matching your contributions and the many years of compounding upon your investment portfolio.
So overall advantages are: avoid paying income tax on reapportioned investment money and don’t pay capital gains tax on increases in portfolio, save more money when you withdraw it as tax rate is lower, make use of years of compounding
Example of a 401K Plan
-you make ,000 a year, set aside 5 percent-00, meaning you direct about 0 every two weeks to your retirement account.
Other Facts about 401K’s
-If you are under 50 the contribution max is set at ,000, and if you are over 50 contribution is ,000. Also, it is important to contribute enough to qualify for a company’s maximum matching contribution to realize the full benefit.
What Is A 401K Retirement Plan? Finance Debunked