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What are 401k’s?

  • By: Jesus Gomez
  • Jul 5, 2018
  • 2 min read

Huh? A 401k? What is that? If you don’t already know the answer, then you’ve come to the right place as moneybuddy is here to teach you all about this important retirement plan!...

Many employers will offer a 401k retirement plan. Only an employer can sponsor this plan. A 401k is tax-deferred. So basically any contribution you make into this plan will have great tax benefits. The contribution amount is taken out of your paycheck pre-tax, which brings your taxable income both for each paycheck and for the year down based on how much you contribute. Ultimately, by investing money into your 401k each month, you will save yourself in the amount of tax you owe at the end of the year.

Once you have put your money into your 401k, it will be invested in different areas of the financial market. It may be invested in stocks, bonds, mutual funds and money market accounts. Your employer will have partnered with a financial institution to take their company’s retirement funds and invest it. You will be introduced to a retirement representative from that company. The representative will talk with you about how much you want to invest and how you would like to invest it. You can choose to have a high-risk, medium-risk or low risk portfolio. However, it is important you make time to meet with your company’s representative in order to ensure your money is placed where you feel the most comfortable.

 
 
 

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