What Is A 401k?

If you’re starting your first full-time job in college or right after you graduate, you might begin to hear a lot more about contributing to a 401k. But what does that mean? How does it help you? A 401k can actually help you prepare for your future when your career has just begun.

A 401k is a retirement savings plan. Only an employer can sponsor one for their employees, and not all employers offer one. It allows you to choose how much money you want taken from each paycheck – before taxes are taken out – and deposited into the plan. So, any contribution you make will have great tax benefits.

Even putting just 1 or 2% of your paycheck into a 401k can make a big difference in the long run. But remember, it’s a plan for retirement, not savings. The money you invest in a 401k won’t be easy to withdraw, so don’t plan on accessing it for an emergency. The rules for taking money out are complex and there can be costly penalties.

Sometimes, employers will also contribute a certain amount into your 401k. They might go so far as to match the amount you’re depositing from your own paycheck. Whether or not they do, you should contribute as much as you can afford to. It will be invested into different areas of the financial market, and the sooner you start investing, the more time it has to grow. You want to be able to pay all your bills after you retire!

So get that 401k started today. Got any more questions about this retirement savings plan? Leave a comment here or on our social media!

Saving For Retirement

Are you saving what you need to for retirement? If you’re younger you may be wondering when you should start saving. If you’ve already started, you could have questions about how you should invest or how much you should be setting aside. We’re here to help!

First off, the sooner you start saving, the better! When you get your first job you should begin setting money aside in a tax-deferred retirement account. This is an investment that you won’t have to pay income taxes on until you start withdrawing money after you retire! Starting younger, even if you end up stopping- after 10 or 20 years, for example – is still way better than starting later, as your money gets more time to collect interest. The returns are well worth not being able to buy every single thing you want in your youth.Most people believe you’ll need about 70% of your salary to survive when you retire – but that depends on if you still need to pay for your house, or you want to travel the world, and so on. Each person will have to figure this out for themselves, so make sure to be honest about how you want to live after you retire so you can better estimate your expenses.

A general guideline for how much of your income you need to set aside is around 10%-15%, if you’re starting in your 20s. Use a retirement calculator like this one to help figure out if you should be saving a different amount. Again, it depends on what kind of lifestyle you’re planning on having when you retire!When you plan your budget, make sure to include enough for savings. Changing your spending habits now could help a lot in the long run, especially when it comes to your retirement. No matter your age, there are things you can do now to work on investing enough money to keep you comfortable when you finally retire. Have any more questions? Message us on Facebook, Twitter, or Instagram, or come talk with us in person at one of our branches! We want to help make your retirement not something to stress about, but something to look forward to.