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401k Plan Advantages

401k plans offer many opportunities to their contributors no matter whether they are regular employees or self employed. Next follow several reasons why you should not put off your participation in such a retirement plan.

  • Saving facilitation

    You make monthly contributions from your salary. As a result you save each month a particular amount which goes directly to your 401k account.

  • Contribution amount is up to you.

    The IRS sets certain limits to the amount you can contribute. It is up to you to decide how much you are willing and able to contribute to your 401k account, but without exceeding the established limits.

  • Easy investing

    The accumulated money in your 401k account is invested in mutual funds which meet certain risk levels and which have been pre-selected by either you or your employer. Investing in mutual funds greatly increase your chances of higher profits.

  • Employer 401k contribution matching

    Some employers provide a 100% matching, which is a dollar-to-dollar matching. Though most employers match only 50% of the contributions of their employees, this is still an instant 50% growth guaranteed.

    However, some employers set limits to the proportion of the employees' contribution that they will match. This means that even if you contribute 10% of your salary, your employer may match only a certain percentage.

  • Tax advantages of 401k plans

    Only after you withdraw money from your retirement plan account you are liable to taxes on your retirement plan earnings. Since at the time you decide to withdraw your money (probably retirement age) you will be at a lower tax bracket, you will greatly save from taxes.

    Furthermore, the contributions you make are before any tax deductions. This means that by making as larger contributions as possible you may fall in a lower tax bracket.

    The money you have in your 401k plan can be rolled over to your new employer in case you quit your current job. Take advantage of this opportunity in order to save from taxes.

Hopefully, we have managed to persuade you that 401k plan is a very reasonable investment. These are only a few of the reasons to choose a 401k plan investment. For more information on the topic visit the other articles available on our website.

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