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PUTTING MONEY INTO A 401K

Everyone should look at putting money into a 401K plan. As soon as you enter the workforce you will be able to contribute to a 401K. If you start investing early enough and with regular monthly contributions, you can easily save a million dollars for your retirement. With experts suggesting that retirees will need 70 to 90 percent of their pre-retirement income to live comfortably, it is best to put money into a 401K plan as soon as you start to work. That way you are making the most of your retirement even if it is decades away.

There are a number of benefits to putting money into a 401K plan. First of all, you are essentially getting free money from your employer. A 401K plan is a defined contribution plan which means that the amount is defined by the employee or the employer. In most instances, some of your income will go into a 401K plan and your employer will match this.

Another benefit to 401K plans is that they offer you the perfect way to save, even if you are the world's worst budgeter. Because the earnings accumulate automatically, you do not have to worry about making deposits or taking a portion of your weekly money and putting it away, which can be hard for those on a budget. The earnings are automatically put into your account without you having to deal with it.

Keep in mind that 401K plans are separate from charity donations and are meant for retirement, not for any rainy day. You will not be able to take the money out until you retire which is at the age of 65. If you retire before then or if you are in a financial crisis, then you can withdrawal the money but for a fee. It is important to look into other savings accounts and investment options besides your standard 401K plan.

Contributing to a 401K

How much money you put into your 401K plan depends on how much you are allowed to contribute. Most employers will allow you to put in up to 15 percent of your annual salary into a 401K plan. The limits according to the IRS are $44,000 per year. If you are making $3,000 per month, then putting in $300 per month is a fairly good place to start. Keep in mind the changing economy, job security and pay raises when you are looking into your 401K plan.

Another thing you need to think about when determining your contributions is what you plan on doing when you retire. Many seniors takes these years to travel and to do as they wish. If a large vacation, a boat, a caravan, a collector car or a cottage on the beach are in the cards, then you should make sure your 401K plan reflects these desires.

Saving for your retirement can be tricky without a standard 401K plan. There are several other pension investments out there such as an IRA and a Roth IRA; however, 401K plans are the most popular form of retirement investments across the United States. This is because the deposits are automatic.

When you are dealing with the everyday costs of living plus saving up for a home, college for your kids and family vacations, it can be hard to find the extra money for retirement. 401K plans do this for you without you even having to think about it. Putting money into a 401K plan will help you balance today with tomorrow and ensure that you are financially secure when you do not have a regular income. It's a win-win situation, especially when it comes time to retire.

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