What is a 401k for dummies Are 4o1k plan really any good? 1-800-566-1002 4o1k plans are the most used types of retirement accounts. Understand the basics of a 401k plan for dummies and avoid the most common mistakes that individuals make when setting up their accounts.
401k retirement plan for dummies
A 401k is a type of employer-sponsored retirement plan. It is a way for employees to save for their retirement by having a certain percentage of their paycheck withheld by their employer and deposited into the company’s plan. Employers can choose to match the employee’s contributions and thereby share the profits of the company with their employees. The plan is usually operated through an investment firm.
How does a 401k work for dummies?
Your employer withholds a certain amount of your paycheck and deposits that money, along with any matching contributions, into your 4o1k account. The money in the plan is invested in various financial instruments, such as mutual funds. The money stays in the account until you reach a certain age when it is legal to withdraw the money, or until you meet any of the several exceptions to the age rule. Since the money will be in the account over a period of years, this causes the account to earn money through compounding, so your account grows not only through your regular contributions made from your paycheck but also by earning interest or dividends.
How do I make contributions to a 401k for dummies?
You make a contributions through your employer. If you decide to participate in the plan, you will determine what percentage of your paycheck that you want to be deposited in your account, and your employer will withhold that amount from each paycheck you receive. The employer then deposits the withheld money into your account, along with any matching contributions, so contributions are made to your account each pay period.
When can I withdraw my money from a 4o1k?
You can withdraw your money at any time. However, if your withdrawal is an early distribution, you will have to pay an extra tax on the withdrawal.3
What is an early distribution?
An early distribution is any money taken out of your 401k before reaching age 59 ½. Early distributions are subject to a 10% tax penalty in addition to regular income taxes, so if you withdraw $5,000 when you are 45, you will have to pay $500 as a tax penalty. However, as discussed in the following question, there are some exceptions that allow you to withdraw money before age 59 ½ without owing the 10% penalty.4
If you leave the company, you can choose to leave your 401k as it is, or roll it over into a Traditional IRA.
If I quit my job where I was participating in a 401k for dummies plan, what happens?
The money you contributed to the 401k is always yours, regardless of how long you have worked for the employer. Generally, an employer requires that you work a certain number of years before you are vested, which simply means that you are legally entitled to the employer’s matching contributions. Therefore, depending on your employer’s rules, you may or may not be able to keep the employer’s matching contributions.
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I'm 24 and want to start getting ready for retirement around 65-70. My company offer 5% match. I know to take the 5% and don't touch it until retirement. And help would be appreciated.
I actually use this to fall sleep and it always works
You did not mention the benefit of lowering your tax bracket due to lesser money coming to the employee due to the salary deferral. Is that not another pro for pursuing 401k?
learn to write properly first
What about post tax?
Everything was good until the last part where you promoted your business. I would've liked a bit more insight. But thank you for the info!
That's Egyptian hieroglyphics ….
I know this is very old but i'm sure you will be getting a lot more hit NOW that we've hit a recession. Thank you
Bank on yourself!
He sounds like Ethan Vanderbilt
What if you've been putting in 5% since you were 25 and (time skip) now I'm 64 and retiring at 65 and I change my input to 70% the day I turn 64. Will they match by 35% my total amount in my 401k account if my company offers 50% match?
Did you intentional do not mention Roth and Roth 401k?
Thank you!!
I made my first million investing my 401k in stock with the help of a popular trader in the U.S Nina Jeanne Rose
she is a very smart woman
Great presentation. Thanks for sharing
I was told that I could role over my 401k account into a Roth account without paying taxes. Why not roll over all your 401k accounts to a roth account?
The animated instruction is surreal!
Wouldn't it be smart to just buy shares of the company you work for?
Dollar Tree offers a 401k
And offers employees option to buy shares in the company
Wouldn't that be the best bet?
if you at the time of withdrawing from 401k account eventually end up paying even more taxes than you were supposed to pay before investing on it, then what is the point of freezing of your money there till you get 59 1/2 years old?
Good info I like your 3 year old writing
Do you have to be in a certain tax bracket to have a retirement insurance contract?
http://www.shootingstarcasino.com
LOL
For new people, put the speed at 1.25 or 1.5… Itll help alot lol
Glad Trump came around
Very explanatory video, Thank you!
excellent video
This is very useful for me
I know this vid is for dummies but c'mon dude that handwriting is too much.
You can borrow from 401k say you borrow 30,000 from it they charge you 1,500.the 30,000 you pay back goes to you in the 401k account and u think you have 6- 10 years to pay it back.Its cheaper than getting a loan
What i don't understand is if its basically a savings account how does it lose money?
It's like joining a gang and you can't get out ,if you fo they cut your testicles ,don't get into that scam
Stay away from the biggest scam
I now have a huge headache!! Wow
This was very informative! Truly the best video to explain a 401k
He's not wrong, but the chart at 10:00 is misleading. In 1963 you pay 90% tax only on the part of your salary over $200k. Who made that much in 1963? My father certainly did not. In 2015 the top tax rate was 40% for the part of the salary over $413k. No my salary was nowhere near that and if it was, I'd have my own private accountant. Google "2015 tax rates"
People here complaining about his handwriting and I’m just here like thank u for the info!..
Can’t even read his writing and he talks too fast, now am even more confused
Dude needs to learn how to write legibly, stop mumbling, and speak slower
what is a match?
Great explanation
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