401K Journey

Have 401k To Have A Wonderful Retired Life

Understanding what is 401k and what benefits employees can have from this will help them a lot to plan for a comfortable retired life. It is a financial panning option meant for US employees useful for saving money for their retirement. The 401k plan can be taken only through an employer and the money is usually deducted from the salary. How much can be taken out of the paycheck is employee’s choice.

People invest money generally in:
• Money market funds
• Growth funds
• Index based stock funds
The amount that is deducted is pretax and the general contribution of the employee is about $16,000 per year. some types of retirement plans get protection from the ‘Pension Benefit Guarantee Corporation’. But the 401k plan doesn’t. Therefore there are risks involved with this plan as with any kind of investment plan. Depending on where your money is invested, it may or may not grow as we predict. In fact, There is every chance of losing money if not invested wisely.

The biggest benefit of 401k is what is known as ‘401k match’ whereby the employer will match a percentage or all of the employee’s 401k contribution. For example, if an employee decides to contribute around 15% of his salary towards the 401k plan, the employer can match this with the same 15% or less. While not all employers will match the employee’s contribution, it is estimated that around 80% do. This is taken as part of employee benefits and is a way to attract and retain good employees. One key advantage of the 401k plan is that it does not attract any income tax until the funds are taken out from the account.

There are so many benefits one can have from 401 plan. This plan is easy to understand and simple to follow. Since it offers different investment option, an employee can chose the best one with less risk involved. It gives the freedom to the employee to increase or decrease the percentage of contribution and also to change the investment plans at his will. So, depending on his other financial commitments, the employee can decide how much to contribute.

401k plan also gives employees a provision to borrow money in case of emergency and this will not show up in a credit history. One can use this money for medical emergencies, school fees, home repairs, repay mortgages or any other purpose. But the point is, the loan will attract some charges and during the period of repayment of loan, the employer’s contribution will cease.

The 401k match rules will be decided at the time when an employee is hired. If your company offers a 401k match, be sensible to try and contribution as much as possible from your paycheck as the same amount will be matched by the employer. The more you contribute, the greater will be the amount you receive at the time of your retirement.

Since the employee has every right to choose any investment plan, take the help of a trusted financial adviser to know which one is the best. It is better that the financial is not connected to you company, so that he will be impartial in his advice. Some companies may invest their money in some standard place which need not necessarily be advantageous to the employee. You want your funds to grow safe and steadily. So invest wisely in programs that will offer a steady growth but not a spectacular one which could very often lead to a disaster.

Like any insurance policy, you must clearly mention who the nominee your 401k plan is in case of your untimely demise and there is still money in the account. The nominee’s name should be declared at the time the plan is started. Invariably the spouse will be the automatic beneficiary. Even if the couple is not together, the spouse still the beneficiary unless a waiver is signed. Children. Partners or a trust can also be the beneficiaries apart from the spouse. Though 401k is not 100 percent fool proof, it is very much a safe and steady investment plan for employees.

Article by David Livingston of EQuote, who is a specialist in everything life insurance. For more information on life term insurance and instant term life insurance quotes, visit his site today.
Mark Barbour, IHG's Journey to Wellness Contest

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