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Hey Dad, what’s a 401k?
If you’ve ever found yourself asking this question, you’re not alone. The world of personal finance can be overwhelming, but understanding important concepts like a 401k is crucial for your financial future. So, let’s break it down.
A 401k is a retirement savings account offered by many employers in the United States. It allows employees to contribute a portion of their pre-tax income to the account, which is then invested in a variety of options such as stocks, bonds, mutual funds, and other assets.
One of the key benefits of a 401k is the potential for employer matching contributions. This means that your employer may choose to match a portion of your contributions, effectively giving you free money to boost your retirement savings.
Another advantage of a 401k is the tax benefits. The money you contribute to your 401k is deducted from your taxable income, which can lower your overall tax bill. Additionally, the investments in your 401k grow tax-deferred, which means you won’t have to pay taxes on the earnings until you start withdrawing the money in retirement.
Speaking of withdrawals, one thing to keep in mind with a 401k is that there are rules and penalties for early withdrawals before the age of 59 ½. This is meant to incentivize savers to keep the money in the account for retirement and avoid dipping into it for other expenses.
When you do reach retirement age, you can start withdrawing money from your 401k. The money you take out will be taxed as ordinary income, and you are required to start taking minimum distributions once you reach the age of 70 ½.
Now that you have a basic understanding of what a 401k is, you might be wondering how to make the most of this savings tool. The first step is to enroll in your employer’s 401k plan if they offer one. Then, aim to contribute enough to take advantage of any employer match – this is essentially free money and can significantly boost your savings over time.
It’s also important to regularly review and adjust your investment choices within your 401k to ensure they align with your long-term financial goals and risk tolerance. And as you progress in your career and earn more, consider increasing your contributions to your 401k to maximize your retirement savings.
In conclusion, a 401k is a powerful tool for building a secure financial future. By taking advantage of employer matching contributions and the tax benefits, and consistently contributing to your account, you can set yourself up for a comfortable retirement. So, the next time you’re wondering “hey Dad, what’s a 401k?”, you’ll have a solid understanding to help guide you on your financial journey.
Just started mine last month!
need more financial advice videos!!
Yo Johnny I have A real question what about if the democrats end up taxing 401k money end of Year.?? I don't care what side your on not trying to stir up the comments? What should we do ?
Pre tax 401ks can be used to lower your income bracket and lead to more dividends. Suck it Dave Ramsey.
coolest dad on the planet
Matching is dead
Wait, so…
In the States does a company have to manage your retirement? Is there a universal plan for that?
Companies match a %
You pay taxes when you take it out. It's not tax-free. Important detail.
ACTUALLY USEFUL YOUTUBE VIDEOS?!?!??!? YOU CANT FIND THESE NOWADAYS LOL
Publix is the goat when it comes to retirement plans. If you don’t know what to do for a career Publix is an easy choice. Good people good steady job and if you’re a good person and work hard you will move up incredibly fast
The hell am I gonna do with the money when I’m 59
Stick to cocktail recipes. There's no law that obligates any employer to match your 401k contribution. Maybe yours is very generous but three's no obligation. So people don't storm your employer demanding matching contribution.
ROTH is the version u need to get. Clark Howard's advice at least
Always wondered that so it’s like the UK pension we get here?
V
The automaker announced in its 10-K filing Monday that in January, it began matching 50% of each employees' contributions to the Tesla Inc. 401(k) Plan up to a maximum of 6% of the employee's eligible compensation, capped at $3,000. Employees are vested upon one year of service, according to the filing.
Most companies only match a percentage- usually 4 to 6%
Not all companies match what you put in
We need better retirement options that cant be taxed b4 or after
A 4O1k is a tax code
And what sucks is that sometimes you have to wait till the beginning of the following month after your sixth month with a company.
That’s what is going on with me RN. Started Oct. 3rd and won’t be able to start till May 1st.