The 401k catches a lot of flak but it was the best vehicle for me to use to retire. In my situation the Pros out weighed the Cons….(read more)
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As a working individual, deciding to save money for your retirement is one of the most important decisions you can make. After all, you wouldn’t want to be caught off guard by unexpected expenses during your golden years. For this reason, I decided to contribute to my 401k plan early on and it turned out to be the best decision I made for my retirement.
First, it is important to understand what a 401k plan is. In simple terms, a 401k plan is a retirement savings account offered by an employer. Employees can choose to have a portion of their earnings contributed to the account, which then grows tax-free until retirement. Additionally, some employers match a certain percentage of their employee’s contributions, which can further increase the value of the account.
The benefits of contributing to a 401k plan are numerous. For starters, it’s a great way to save for retirement without having to think about it. Since the contributions are automatically deducted from your paycheck, you won’t miss the money and it will add up over time. Plus, since the account grows tax-free, you won’t have to pay taxes on the money until you make withdrawals in retirement, giving you more financial flexibility.
Another benefit of a 401k plan is that it allows you to invest in a variety of mutual funds, stocks, and bonds, which can potentially yield higher returns than a traditional savings account. This is because the money in a 401k grows tax-free, meaning you don’t have to pay taxes on any gains or dividends until withdrawals are made. This can substantially increase the overall value of the account.
For me personally, contributing to my 401k plan has given me peace of mind about my financial future. As a young adult beginning my career, it was difficult to think about retirement savings when there were so many seemingly more pressing expenses. However, by starting early and consistently saving, I am confident that I will have a comfortable retirement.
In conclusion, contributing to a 401k plan is an effective way to save for retirement and potentially grow your savings tax-free. Additionally, it is a way to ensure long-term financial stability and prepare for any unexpected expenses that may arise in the future. Therefore, if you haven’t already, consider starting a 401k plan and contributing a portion of your income towards it. You won’t regret it!
Make full contributions to anything that has matching 401k Roth ,401k and HSA in that order. Then do a Roth IRA. I missed out on alot of Roth savings because my company didn't offer it for a while and then when they started it, it wasn't matched.
Good stuff, started maxing out my 401k in my early 30s. Same with my hsa in my early 40s. Retired in my early 60s 4 years ago and have just started drawing sparingly on the HSA, shouldn't have to touch the 401 til required. If you start early, invest wisely, and live within your means these investments will carry you far into your retirement. For me more insurance than anything else now. You can never start too early.
Thanks for your wisdom Steve – you are a testament to "slow and steady wins the race". I have a pension, but I started putting $100/mo into 457b (no match) back in 1994 and upped it a bit every few years. I always tell the youngsters that was, in hindsight, one of my best moves. Wish I'd done more, but glad I did what I did. I kind of wish I'd done more with Roth IRA and HSA, but I've done some and it's helpful. Doing something is usually better than doing nothing – unless it's a really terrible idea.
Steve, the issue is companies terminated pensions, 401K was a pension supplement, not a retirement account.
Another good'un Steve!!
Never had the income to save it's been paycheck to paycheck 2exwives that never made a lot double child support for 18 years seems like I have been trying to catchup
Yes, we agree. With the employer match the 401 makes sense. We had that and IRA as well. Taking the money out before you see it is the way to go.
completely agree! I never really understood all the investment choices but just picking s & p 500 and things like Russel compounded earnings. In good years, it went up and when things got bad, they went down but when I was young and had time, I just watched it go back up. When it got close to retirement, I just made sure most of it was in stable value or a fixed income where you didn't lose. I wish we had accounts like our 401k on the outside. I think they are great!
Wishing all a safe and warm weekend! Great video, Steve.
ya me too. back in 88 i didn't know a 401k from a potato. but i must have had some sense because i started putting money away and continued up until today. increased it as my salary increased and didn't even miss it. but it piled up over the years. company match was a big part of it. when i changed jobs i rolled them into IRAs and maxed them out eventually.
My company put 12-15% of my pay away for me in a profit sharing plan. After 33 years I retired at 53 with over a million in our plan.
With the employer match, a 401K is a great way to save. Talk to anyone who is 75 years old or older, they will tell you the worst thing in retirement is the RMDs. Now Congress has changed the rules on 401K concerning your heirs. Best thing to do is to zero out your 401K by moving it to a Roth, one year at a time from 60 on up. Stay under the IRMAA limits and you will be fine. After 3 years I am still moving it, however, at 70 I expect it all to be moved into a Roth with zero RMDs. Not retired yet.
There is alway some emergency or event that keeps people from saving. They think about the now, not 30 years from now. Thats were Automatic savings like 401 K comes in Forces people to save. , just like SS.
I can’t wait for my COW BELL Tuesday!
Good perspective, Steve! Consider the 401k might have limited investment choices, but they often have one investment choice that pays in excess of 50%: The Employer Match! No IRA has that investment choice.
The power of the 401k is the match and the fact that it gets cut out your check before it hits your bank account. It's automated savings.
Beyond a doubt! If I hadn't done it, I would NEVER have saved a dime by waiting until after all the other bills were paid to then send a chunk off into an investing account. Best gift I ever gave myself. Love yourself enough to pay yourself BEFORE anyone and anything else.
some times i think ,factory work is like working on the chain gang , at 59 the 401 k keeps me going
I also agree and glad to have a 401k with company match. I started young and 30 years later will give me a better retirement.
I agree Steve. The 401k and the company matches for 30 years was the key for me to reach my goal. I could not have saved this much. Just did not make a big salary.
Hey there my friend….great video. Dennis