A 401k Equates to Financial Self-Preservation For The Future

A 401k offers a greater financial future than Social Security or most pension plans. It's now more important than ever for employees to invest in this financial lifesaver.

Outside Retirement Resources

Both Social Security and pension plans are considered to be outside retirement resources, meaning the resources for retirement come from somewhere other than the employee. It's no secret that outside retirement resources have caused numerous financial disasters in the last few years.

Social Security is no longer a viable option for retirement because it doesn't accumulate wealth like a 401k does. Additionally, Social Security has suffered serious funding blows in the last years. Not only does it fail to ensure hard workers with a safe retirement, but it also fails to ensure them of any retirement.

The same is true of pension plans. There have been instances where these plans were not paid out due to money issues with the payer. Other pension plans are negated through corporate takeovers. It seems that hard workers are out of options, but that's only true if those hard workers rely on outside resources. When an employee sets up a 401k, no one can touch that money except the employee.


https://thriveglobal.com/?p=833444&preview=true
https://thriveglobal.com/?p=833447&preview=true
https://thriveglobal.com/?p=833451&preview=true
https://thriveglobal.com/?p=833462&preview=true
https://thriveglobal.com/?p=833460&preview=true



The Basics

There are two types of plans: traditional and Roth. Both can be converted into an Individual Retirement Account (IRA) upon retirement or if an employee leaves the company, no matter the reason.

If participating in a traditional plan, then an employer-sponsored plan allows an employee to save for his or her retirement with a lowered tax burden, meaning the employee enjoys Tax-Deferred Earnings. This begins the moment an employee pays money into their account. The IRS allows for this deferment because the money put into the account comes from a paycheck prior to taxes being deducted. The result: less taxable income and a lower tax bill. Taxes are never paid on the account, or any investment earnings that it generates until the money is withdrawn. Most people take out this money at retirement when they have lower incomes and tax rates. These later-life low numbers mean less money is paid out on the savings.

If participating in a Roth, deferment doesn't reduce one's taxable income or tax bill. The reward comes at the end when the money is withdrawn as tax-free as long as the employee is at least 59½, and the account is at least five years old.

Another plus is that it is common for an employer to match a portion of an employee's savings after a certain percentage is saved. This occurs in both traditional and Roth plans. Sometimes this match can equate to a fifty-percent return, virtually unheard of in investment returns.

Available Investments

It's common for plans to offer eight to twelve investment options. Some of those options include company stock, money market funds, stable value accounts, and stock mutual funds. A financial advisor can offer great insight into what kind of investments should be made based upon individual needs.

In the end, it's all about a strong financial future for retirement as well as all of the things you would like to do in your later years. A 401k can create a great foundation.

When looking to set up a 401k, people go to MKG Financial Group,



Article Source: http://EzineArticles.com/9153085