4 Things You Need to Know about a 401k

4 Things You Need to Know about a 401k

What is a 401k?

As the time approaches for retirement, it can cause a lot of stress, especially when trying to figure out how to get the most out of your long years of hard work. If you are young, searching for the right retirement plan is crucial to future success. The 401k retirement plan meets all of your needs without sacrificing quality. You need to know a few things about the plan before you invest in it, though.

History of the 401k

What is a 401k? In the 1980s, the need for a retirement plan arose, mainly as a supplement to pension plans. These pension plans were controlled solely by the employer and given out over the course of retirement. Over time, however, the cost of pension plans increased, so the 401k replaced these pensions.

It is Supplied by Your Employer

First and foremost, a 401k retirement savings plan is still supplied by your employer. The difference is that you delegate when your money is given to you. A 401k still works similar to the old pension plans just with that little alteration. The most beneficial aspect of a 401k rollover is that you are able to invest your money without the added cost of taxes.

You Have the Power

As mentioned before, you do have the power when it comes to this retirement plan. You are the 401k administrator to your own bank accounts. There also is a variety of options for how you choose to invest your money. For example, you can take out your money in bonds, stocks, and other mutual bank funds, or even in a 3% match plan.

You Work for Access

The only downfall to the 401k plan is that you do have to work for a certain amount of time before your benefits become visible. This means that you are not allowed to take money out of your account until a certain point. Basically, you are still working for the right to control your retirement plan. This is a company’s way of keeping their employees from taking advantage of the system and cashing out early. It is also a good idea to hire someone other than yourself, more than likely a professional, to oversee your accounts and to help you make financially wise decisions.

The 401k plan works to make retirement easier for you. It gives you the control that you desire without sacrificing work life balance. Research what a 401k plan can do for you before making your final decisions concerning retirement.

 

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