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401k Plan - Take Full Advantage of Your Employer's Contributions and Tax Breaks 401k plan is a retirement plan sponsored by US companies. (This is equivalent to the Defined Contribution plan in the UK). You are allowed to save for your retirement and the savings are left to you and your financial advisor to work out the retirement investing strategies. You can opt to have a portion your wages paid directly into your 401k account. Tax on income from the investments and earnings are deferred until you withdraw money from your 401k account.
If you elect to save for your retirement, your employer can opt to "match" a portion or all of your contribution. Your employer's contributions are added to your 401k account to boost your savings. Some employers may opt to pay the profit sharing amounts into the employees' 401k accounts. You'll be prudent to seek your financial advisor's expertise before deciding on the retirement investing strategies. Your financial advisor will assess your appetite for investment risks and will work out a retirement investing strategy to suit your risk appetite.
Many companies offer their employees the option to purchase the company's stock. It's advisable to carry out an annual review of your 401k plan investments to assess their performances and decide whether you need to take action to put your investments back on tract. A 401k rollover is a situation when you change job or retire from work. When this happens you are entitled to transfer or "rollover" from your previous employer's 401k to an Individual Retirement Account (IRA.) Again speak to your financial advisor and get his advise on 401k rollover as there are several types of IRA. The key to a successful 401k plan is to start as soon as you can. The combined effects of your employer's contributions and tax advantages given to your 401k account, will need time for compound interest to deliver your retirement plan income.
Retirement planning helps you get more out of life in retirement |
