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401k Planning

Do you have a 401k planning? If the answer is no, you are missing out on a powerful and proven method of producing retirement income with little or no pain and sacrifice for yourself. As any financial planner will tell you, 401k is the best retirement planning you can find.

How can 401k change your future? First, 401k retirement accounts are the most painless way to set aside money. Your contribution will be taken before taxes, so your savings will be offset by being in a lower tax bracket. Another advantage is that many employers will match their employees’ contributions up to a fixed percentage of their income. If your employer participates in this sort of plan, it has the potential to double the amount of money available for your retirement without a single penny of extra savings on your behalf. No one can afford to turn down this much free money.

Still not convinced? You must not know about the other tax advantages of 401k plans. First, there is the tax advantage of having a lower income, on paper at least, thanks to your 401k contributions. Second, your money grows in the 401k account tax deferred. This means that the sizeable chunk of profit that would have been claimed by the IRS in any other account is instead left in the 401k to grow and produce its own dividends. You won’t pay a cent of taxes on that money until you retire, when your income and tax rate will likely be lower than it is now. By then, your earnings will have grown exponentially.

401k planning is so easy, there is really no reason to be without this powerful and crucial component of an investment portfolio. Do you have trouble remembering to write a check every month, especially for non-essentials? In this case, that’s no big deal. Contributions to a 401k are usually taken out before your pay check is printed. Are you worried about being able to afford it? Because the money is taken pre-taxes, the actual amount you pay will be mitigated by the amount you save. Perhaps you think the money might grow faster in real estate or another fast-growing area of investment. This is always possible, but these dividends are not tax deferred and thus are constantly leaking a steady flow of your money. 401k retirement accounts also tend to be better diversified than ‘quick money’ investments, and thus can withstand the fluctuation of the economy and the stock market, which means your money remains under your stewardship until you are ready to let it go.

If you haven’t talked to a financial planner and your employer about setting up a 401k, it’s about time to do so. 401k planning is simple with the assistance of a professional, and the benefits are too great for anyone to be without this powerful investment vehicle. By the time you retire, those small 401k contributions will likely have grown into six or seven figures, giving you the security you crave and helping you finance the retirement you deserve.

401k Planning
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