The 401 (k) retirement plan, first popularized in the 1980s, is a great way to set aside the money for retirement
Like other pension plans -. Traditional IRA or Roth IRA - a 401 (k) investing your money in a custom mix of individual stocks, money market funds and bonds to maximize your return.
But what kind of pension plan is right for you?
What makes a 401 (k) so popular
the first reason why a 401 (k ) is so popular with the employees is that contributions can be automatically deducted from each paycheck
You set the amount - ?. usually a percentage of gross salary - and the human resources department did the rest. There is much to be said for "easy."
Better yet, the money you contribute to a (k) plan is invested 401 dollars before tax. So every dollar you set aside in your retirement plan reduces your taxable income for that year.
The flip side is that you will have to pay tax on the money you withdraw from the (k) account 401 during retirement.
This brings us to an important question ...
do you expect to be in a slice more or higher tax when you retire?
If you and your spouse make good income now, you'll probably earn less in retirement. In this case, a 401 (k) or a traditional IRA makes the most sense, because you can defer taxes until later.
But if you are young and single and do a decent wage, but modest, it's probably smarter to pay taxes now and withdraw the money tax-free later, when you are in a higher tax bracket.
in this case, a Roth IRA is probably the best for you.
in truth, what kind of pension plan you choose is less important than simply investing in retirement. Tweet this
start early and let compound interest to be your friend!
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