Hello, my name is Rhonda. If you have financial goals, this blog can help you achieve them. A few years ago, I realized that I didn't have a good plan for my future and I wondered if my financial needs would be met after I retired from my job. I immediately started planning for my future by speaking with a financial advisor and I learned a wealth of information at our meetings. By following the recommendations of my advisor and by learning everything I could about finances and money, I now feel very secure about my future. If you need financial help for retirement planning, college savings or even for an emergency fund, you can get sound advice by reading my blog. I believe that by following a few basic strategies, everyone can meet their goals and be financially secure.
If your employer offers a 401k retirement plan, you should take full advantage of this investment. By doing so, you will reap a lot of benefits, yet you may wonder if this is enough. Visiting with a retirement planner is a great way to find out if this is enough, and the planner will probably want to see the details of your 401k plan. If you are not maximizing your contributions, the retirement planner will probably recommend starting with that, because there are several key benefits of utilizing a 401k plan.
Your employer may match some of your contributions
Every employer offers different incentives with 401k contributions, but many will match half of an employee's contributions up to 6% of the person's income. This means that if you make $75,000 per year, you could contribute $4,500 per year, and your employer will contribute $2,250. In all, this is $6,750 you are putting away tax-free for your retirement. This is not all you can contribute, though. You are free to contribute up to the annual maximum for the year, which was $18,000 in 2016; however, your employer will only match up to a certain amount.
The best thing you can do is put in as much as possible and always take advantage of getting the maximum amount you can through your employer's match.
The contributions reduce your taxable income
One key advantage of using a 401k is that all the contributions made are not taxed. The contributions you make actually reduce your taxable income, which means you will likely have lower taxes to pay right now. This is very beneficial, especially if you expect to make less income when you retire. When you retire and take your money out, you will pay taxes on the money, but the money will be taxed at your current tax rate. If your tax rate is lower when you retire, you will ultimately pay lower taxes in all.
You can choose your investments
Finally, you will get to choose the types of investments your money goes into. If you are young, a retirement planner may recommend choosing high-risk investments. These may have higher risks, but they also have the potential to make more money with the money you invest.
If you would like to learn more about retirement planning and ways to save more money, you should schedule an appointment with a retirement planner, like one from Estate & Financial Strategies, Inc., in your city.