Starting Your 401k Savings

In today's world fewer and fewer companies are offering traditional retirement plans. That means you're on your own to make sure you have the money you need to live comfortably throughout your golden years. One way to start socking away that nest egg is with a 401k. Many companies offer 401k programs as an alternative to retirement plans. In a 401k you put a portion of your paycheck aside in a tax-deferred investment program that will hopefully grow to a quite sizeable account by the time you're ready for retirement. You can generally you can start 401k contributions after you have worked for a company for a full year.

If your employer offers a 401k savings plan, there's no reason to not take advantage of it. Not only is it a great and easy way to save money (it can be pulled directly from your paycheck with no thought on your part), but you can also get free money. Many employers offer to match a part of your contribution. For example, if an employer offers ½ of 1 percent up to a maximum of 8 percent of your contributions, by putting 8% of your paycheck away in your 401k, you'll actually be getting an extra 4% absolutely free.

Start as soon as you can. The earlier you begin investing for your retirement, the more money you'll have once you reach retirement age. Not only will you benefit from your own contributions as well as those of your employer, you'll also be earning interest and dividends on that money from the program's investments. Individuals can set aside over $15,000 each year in a 401k account. The more money you put in it, the more effectively it can work for you gaining interest and building toward a financially solid and secure retirement. And even though you may start your retirement contributions through one company, if you change employers you won't lose any of that money. You can switch your 401k funds to your new employer's investment program with no penalties whatsoever.

While many people are of the mind that they would be better off doing their own investing, personal investing is a hassle that is often 'forgotten' about. Whether you put it on the back burner this month so that you'll have money to purchase something else, or you just don't get around to it, it amounts to finances that are not being put away for your latter years - when you may desperately need them. 401k programs effectively eliminate this shortsightedness. Paycheck deductions are taken out before you ever see (or get a hold of) the money. It's always being put away without your having to think about it. Furthermore, if it's out of sight it's out of mind, and eventually you won't even miss it.

The life you will live when you retire depends greatly on how you live and prepare for it now. While retirement may seem far away, it will be here before you know it, and you want to be ready for it.

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