ITS OKAY TO 401K

Your job offers a 401K. It's an extra deduction from your paycheck and you need all the money you can get today, not sometime in the future when you retire, so why would you participate in your workplace 401K program? It's so crazy, it just might work. Consider the following:

WHAT IS A 401K?
401K  is actually the name of the chapter of the Internal Revenue Code that allows for tax deferred income to be used for retirement with maximum limits set by the IRS. This retirement benefit has been around since 1978. You can put aside pre-tax income to be used for your retirement. After age 59 1/2 you can withdraw the money for retirement. These funds will be taxed on withdrawal.

WHAT IS A ROTH 401K?
Roth 401K also allows for tax deferred income to be used for retirement with maximum limits set by the IRS. This retirement benefit has been around since 2006. You can put aside after-tax income to be used for your retirement. After age 59 1/2 you can withdraw the money for retirement. The account must be at least five years old before withdrawal. Since these funds were already taxed, they can be tax free on withdrawal. The Roth 401K was due to be phased out in 2010, but was reinstated by an Executive Order and is still available to workers today.

HOW DOES IT WORK?
Usually, a small percentage of each paycheck goes into a retirement account. The amount is then invested in a package of stocks, municipal bonds, mutual funds, etc. Many companies will match a percentage of what you put in. For instance, if your paycheck is $1000 before taxes and your 401K contribution is 3%, $30 per paycheck would go into this account. If your employer matches your contribution at 50%, your retirement account will receive an additional $15 per paycheck.

HOW DO I PARTICIPATE?
Speak to the HR Department at your job to determine if such a program is available. It's also a good idea to speak to the "plan administrator" if one is available. This is the person who works for the company that administers the actual retirement accounts. He or she will be able to help you choose the group of investments that is right for your package. If you are younger, you may put together a package that contains less aggressive, long term investments. If you are closer to retirement age, you may want to go with more aggressive investments because you have less time to build your account.

Your employer may bring a plan administrator in to speak to the employees in a workshop setting. Attend this workshop to gather more information, even if you haven't decided whether you will participate.

AN ASSET IN A TIME OF TROUBLE
Your retirement fund is also an asset. In case of emergency, you can borrow against it. However, because these funds are meant for retirement, they will not be as liquid as a bank account. If you are not yet retirement age, you can withdraw the funds with substantial penalties in case of certain specified financial emergencies.

PLAN FOR YOUR FUTURE
Lets face it. The retirement funds our parents and grandparents relied on will not be available to anyone after the Baby Boomer generation. Anyone born after 1959 will likely have to plan for our retirement with an assortment of extended work life, social security, pension, retirement investments, savings and our own children! Don't wind up as an eighty-five year old Greeter at Walmart.
Plan properly for your retirement!

Let's Be Careful Out There!