When you are considering ways to save for your retirement, one of your options is a 401K plan. You may have heard the term thrown around in different conversations, but do you understand how it works or where it came from?
The 401K was developed after the Tax Reform Act was passed by Congress in 1978. The act was passed to encourage working individuals to save money for their retirement while having a way to lower their federal and state taxes in the process. The name for the 401K came from its Internal Revenue Code-section 401 and paragraph K. A benefits consultant named Ted Benna created a plan for the 401K in 1981. In 1991, final regulations were published for the 401K plan.
Some of the benefits you receive with a 401K include a lower taxable income, earnings and savings without the need of deposits, and free money from employers. When you begin a 401K, you first tell your employer how much money you wish to have entered in your account. This amount can typically be about 15% of your salary; however your employer does have the option to put a limit to the amount. That money is then entered into your account before taxes are withdrawn. There are also times where your employer will match what you decide to contribute to the 401K. Your money is placed in the hands of an administrator of a third party to be invested in a number of different ways. You can decide which ways to invest your money between bods, money market accounts, and mutual funds, along with other options. There are online calculators like this one that will help you understand how much money your can accumulate depending on how long you have a 401K and how much you decide to contribute to the account.
Your 401K with Safe Retirement Solutions
At Safe Retirement Solutions, we are here to help you plan your retirement. We know that the idea of retiring is daunting and there is a constant fear of outliving your retirement funds. One of our trained and educated advisors can meet with you to decide which options are best for you and how to begin with a 401K.
Want to get started with a 401k? Do you have questions about retirement? Give Safe Retirement Solutions a call today at 410.266.1120 or click here. We serve the residents of Annapolis, Towson, and Columbia, Maryland as well as the residents of Saint Augustine, Florida.
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