The Importance of 401ks

If you want to secure a good retirement, then one of the best ways to do it is to make good use of any 401K plan that your company might have. Simply put, they are one of the best and most important ways to save money for retirement and to secure your financial future even when you’re done working.

401Ks are immensely important if for no other reason than that they provide a real easy way for those with access to them to save for retirement. With most plans, the money will be automatically taken out of your paycheck, meaning you don’t really have to do any work to make sure that the money is being saved. If you don’t even have to think about it, then it will be a lot easier to continually save money, which adds up in the long run.

Another good and important thing about them is that you basically get a tax deduction for putting money in a 401K. For an example, let’s say you make $50,000 a year. So your income taxes (like Social Security, etc) would be taken out of $50,000… however, now let’s say that you have 10% of your paycheck going to a 401K… then the taxes will be taken out of $45,000 instead of $50,000… a nice little tax break there and another incentive to make use out of your company’s 401K plan.

Another important thing about them is that often a company will match what you put in up to a certain point. So in the original example of someone making $50,000, if the company matches up to the first 5%, that would be like another free $2500 saves towards retirement for the year, and you don’t need me to tell you that that’s awesome. The company matching gives you an automatic return on the investment, and also helps as that money grows.

So putting it all together, a 401K is very important and should be utilized by everyone that has access to them. It allows you to continually (and almost thoughtlessly) save for retirment, gives you a little bit of a tax break, and in some instances it’s actually like receiving free money when your company matches your contributions. A great deal all around, and a necessary step for securing your financial future into retirement.