401K retirement plans are company sponsored plans that provide financial security. You pay no income taxes on the money that you contribute each month, until retirement. Here are some important benefits that these retirement plans provide.
You do not pay income taxes on your retirement money until you withdraw it. This includes all of the money that the fund earns over the years. Also, there are no capital gains taxes, as you only pay income tax on money that you take out. Your entire net worth is not taxed, and this can keep many people in lower tax brackets.
After several years, your 401K plan is worth a substantial amount of money. The value can be enhanced when employers institute policies of matching contributions. Some employers will match 100 percent of employee contributions. However, this percent may be even more, in some cases. This is often used as an inducement to keep valuable employees.
You have a lot of investment options with your plan. For example, you may have an opportunity to say how much you invest each month. When you contribute the maximum amount allowed, you can have a substantial retirement nest egg. You also have a say in how the money is invested. Some people may want to keep their investment conservative, while others may not.
Maybe you are faced with a sudden financial hardship. Your retirement plan can be an oasis in a desert of financial problems. Employees can borrow from their retirement funds to keep from losing their homes. They also can use the money for things such as medical expenses and for college education funds. However, this money may be subject to early withdrawal penalties.
Your 401K plan provides many important benefits. There is a lot of help online with understanding all of your options. In fact, some sites offer special calculators that allow you to explore your options.
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