401 K, an easy way to save for retirement
Plans offered by companies to their employees tax-free contributions deducted from wages.
When you sign an employment contract with a medium or large company does not miss the papers in which he explains to you and enrollment is completed in the pension plan. The so-called 401 K. Moreover, study it and enter it. The younger the better.
Because it is a savings plan / investment that will help to supplement the income from Social Security when you retire. And above all, because it is one of the most comfortable and easy for workers who end up saving almost without realizing plans. Without pain.
But things first.
401 K savings plans are provided by the companies that thrive on a percentage of your choice from your income before taxes. Some companies automatically enroll workers and others make this optional savings.
There is an annual contribution limit set by the IRS this year is $ 17.500. Gains on investments in these accounts are also tax-free until you use them in your retirement.
What financial advisers say is that it’s a small savings is barely noticeable once the paycheck, especially if you start deducting a small percentage, 3% ?, which can rise over time charged. It is recommended to gradually reach 10% or 15%. Some companies help with input. If you change jobs you can take with you the account and integrate it into another 401 K or other savings account.
Some companies offer Roth 401k, in which the contributions are not tax-free, but if it is money when you use it. If you work for the administration, the account will be called 457 and employees of public schools and charities, the variant is 403K.
Plan managers help you design the investment strategy (in which you have to take risks in the stock market in varying degrees, depending on your age) and definite plans but you can also make a different portfolio. In the long run, may you alternate lost profit (discuss investment in #TuRetiro, December 3).
The money you earn you can not play up to six months before you turn 60. If you do it before, plus taxes, the IRS will pay an additional 10% penalty on the amount you take out.
Some plans allow you to take out money without penalty if adversity (a health problem, an embargo …) but it is complicated. If you need the money early is better to ask for a loan on those savings you do not have to report to the IRS and have lower interest than the rest.
But remember, this is not just savings, is an income for retirement.
The Latino community is less 401 K accounts, not only because 38% work for companies that offer but also because, according to the National Institute for Safety in the Retiro, few subscribe to these plans when offered. Hispanics are more sparing you investors.