The Pension is Dead, Long Live the 401K!
A Guide to Those Born Before 1980
As everyone knows, as more and more jobs get sent overseas fewer and fewer benefits are getting handed out to workers. What is even worse is that Social Security is in grave jeopardy. Neither of these two situations are going to resolve themselves any time soon. So the IRS in their has created tax-free vehicles for the purpose of long-term investment for retirement.
The 401K is the simple tax code for it. If your employer has a matching offer make you take advantage of it fully. The old theory of always saving money becomes most important in the case of a 401K. These vehicles only work and are effective when you put money in them religiously, so keep that in mind. that 401K’s don’t have strict limits like IRA’s and you can contribute a large amount of your paycheck to them. 10% of your yearly income is very wise and at those rates by the age of 65 you will have plenty of money to retire on.
Most companies today have 401k plans set up for their employees. They invest their money in very conservative investments to help you increase your savings gradually over the long term. As your are looking at the stock market, keep in mind that your 401K has 20,30, or 40 years to grow.
Make sure you discuss your companies 401k plan with the Human Resources department at your job. Choosing the wrong type of mutual fund will dramatically affect the amount of interest you earn over time.
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Tags: 401k, pension plan
This entry was posted on Sunday, November 2, 2008 at 8:52 am and is filed under 401k. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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