Stock Investing Strategies

Stock investments

rainbow

Why Invest in 401ks

A 401k plan can help an employee save up some money for their retirement. Millions of American have been able to use this strategy in order to save and grow their money for when they retire.

So, what is a 401k? Well a 401k plan is a plan which an employee can set aside a portion of their income and have it grow tax deferred until they eventually take it out for their retirement. There are many reasons why this plan is so important.

1. Social Security Is Fading

The social security system is having a hard time, and probably will not be around forever. So if you don’t have any retirement plan and are just hoping social security will be there for you when you retire, just remember that you are basing your security on something that isn’t secure itself.

I’m not counting on it to help me when I retire. In fact unless it gets a large sum of money from something I doubt that it will be around for very much longer. So saving some money up for retirement can be a very important step.

2. Emergency Money

We all need an emergency fund. Things happen, and having some sort of an emergency fund is important. Of course a 401k is suppose to be for your retirement so pulling money out early is usually a bad idea, but at least you know that that money is there if you ever need it.

The major disadvantages of getting out an early 401k withdrawal is that there is a small early withdrawal penalty that you will be hit with. However if you are in a bad situation and qualify for one of the 401k hardship withdrawals you may be able to avoid it.

3. Tax Deferred

The best part about a 401k plan is that the money you invest and any interest it makes is tax deferred. This can lead to larger growth and a smaller tax bracket.

Of course because the money it tax deferred there is a 401k contribution limit that you can invest. But the plan can still be very powerful

Those are just some of the reasons to take advantage of this plan. It can be very powerful and has helped a lot of people out in the past.

Tags: ,

Comments are closed.