The type of savings fund that can get you the most flexibility over time should be used when saving for retirement. This retirement fund is called a 401K. The 401K account is funded via wages that are taken directly from your employer into a retirement account. 401K contributions come from your pretax salary and cannot be taxed themselves. The name 401K came from the IRS code that created these types of accounts.
Some of the advantages to having a 401K include the following, your company may match the amount your put into the 401K, you can make a lot of money if you invest for the long term for 20 to 30 years, you reduce the amount of taxes you have to pay based on your salary and all contributes are tax deferred unless they are withdrawn prior to age 59 and 1/2.
Additionally there are pension laws in place that protect the retirement account as it is viewed as a personal investment. You don't have the guarantee against loss like you would with a fixed annuity. Though these laws are designed to help.
A few of the disadvantages are that you cannot access the money in your 401K until you are 59 1/2. If your employer does contribute to your 401K then only your contributions will be going towards your investment, like is the case with IRA accounts. Also a 401K is not insured by the Pension benefit guaranty corporation. Like is often the case with a fixed annuity.
It is possible to investment in a variety of ways in your 401K. Your money can go towards money market funds, maturities, bonds, stock funds and other avenues. You are allowed to chose how you want to invest and can make changes when additional funds are deposited into the retirement fund. Most financial experts say that most individuals are not aggressive enough with their investments as stocks that are held for a long time do very well. Towards the end of the 401K period, when you may want to take money out you can switch to more conservative funds.
There are 401k rules and maximum contributions limits that can be made to your 401K. Each year will have a maximum allowable 401k contribution limit. Most contributions are made before tax, as you will receive the most benefit from this type of contribution. Pre tax payments must be made fairly quickly. It is also possible to make after tax contributions.
After tax contributions are easier to access as it is possible to take a 401k loan out from yourself from your after tax contributions. These do have some drawbacks; so make sure you understand the 401k rules. The 401K retirement account was designed to benefit the majority of workers, but also benefits the individuals that run the companies. As they are able to provide a great benefit to their employees. Much like 401k's there are IRA rules if you're considering those retirement accounts.
It's important to note that retirement accounts like IRA's are individual accounts; so taking title is an easy choice. When evaluating your other accounts, especially joint ownership accounts, you should take a look at the many choices. It may be more beneficial to set up a joint tenancy or tenants in common account rather than a community property account, for example. The simple act of setting up title can have big implications.
An IRA account is also a retirement account but it is slightly different then a 401K. It is possible to take money out of an IRA account without penalties to pay for a house, education or medical expenses. These come with certain IRA limits, however. Make sure you understand both the IRA and Roth IRA rules before making a choice. The traditional IRA benefit is the IRA deduction where as the Roth IRA is the tax free income upon withdrawal. Since the IRA is an individual retirement account and you do not receive matching contributions from your employer.
Some of the advantages to having a 401K include the following, your company may match the amount your put into the 401K, you can make a lot of money if you invest for the long term for 20 to 30 years, you reduce the amount of taxes you have to pay based on your salary and all contributes are tax deferred unless they are withdrawn prior to age 59 and 1/2.
Additionally there are pension laws in place that protect the retirement account as it is viewed as a personal investment. You don't have the guarantee against loss like you would with a fixed annuity. Though these laws are designed to help.
A few of the disadvantages are that you cannot access the money in your 401K until you are 59 1/2. If your employer does contribute to your 401K then only your contributions will be going towards your investment, like is the case with IRA accounts. Also a 401K is not insured by the Pension benefit guaranty corporation. Like is often the case with a fixed annuity.
It is possible to investment in a variety of ways in your 401K. Your money can go towards money market funds, maturities, bonds, stock funds and other avenues. You are allowed to chose how you want to invest and can make changes when additional funds are deposited into the retirement fund. Most financial experts say that most individuals are not aggressive enough with their investments as stocks that are held for a long time do very well. Towards the end of the 401K period, when you may want to take money out you can switch to more conservative funds.
There are 401k rules and maximum contributions limits that can be made to your 401K. Each year will have a maximum allowable 401k contribution limit. Most contributions are made before tax, as you will receive the most benefit from this type of contribution. Pre tax payments must be made fairly quickly. It is also possible to make after tax contributions.
After tax contributions are easier to access as it is possible to take a 401k loan out from yourself from your after tax contributions. These do have some drawbacks; so make sure you understand the 401k rules. The 401K retirement account was designed to benefit the majority of workers, but also benefits the individuals that run the companies. As they are able to provide a great benefit to their employees. Much like 401k's there are IRA rules if you're considering those retirement accounts.
It's important to note that retirement accounts like IRA's are individual accounts; so taking title is an easy choice. When evaluating your other accounts, especially joint ownership accounts, you should take a look at the many choices. It may be more beneficial to set up a joint tenancy or tenants in common account rather than a community property account, for example. The simple act of setting up title can have big implications.
An IRA account is also a retirement account but it is slightly different then a 401K. It is possible to take money out of an IRA account without penalties to pay for a house, education or medical expenses. These come with certain IRA limits, however. Make sure you understand both the IRA and Roth IRA rules before making a choice. The traditional IRA benefit is the IRA deduction where as the Roth IRA is the tax free income upon withdrawal. Since the IRA is an individual retirement account and you do not receive matching contributions from your employer.
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