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Anatomy Of A Retirement Plan
Almost every company has a retirement plan, but are you taking full advantage of it?
401K
The typical company offers a 401K plan. Named after the IRS’s section 401K, this plan allows employees to set aside tax deferred money out of every paycheck. This is a flexible plan that allows you to determine how much you want to set aside each pay period as well as several choices of where the money will be invested. This is a great way to save for retirement since the money you contribute comes out of your pay before taxes giving you more to save. Some companies even match your contributions!
If you want the most money you can get at retirement you should contribute the maximum amount which is up to 15% of your yearly earnings up to $15,500 (2007). This is the amount limited by the IRS and you may also be subjected to limits by your particular company.
It’s also in your best interest to start saving for retirement as early as you can - from your first job on. Even if it seems like you cannot afford to have any money deducted just a little bit will add up over the years and once you start making contributions you won’t even miss the money!
Before you join any retirement plan, you need to read the prospectus and review the track record of the plan provider. Look at all the options - typically they are categorized as low risk, medium risk and high risk and you can divide your money into each plan according to your comfort level. Remember, high risk plans might pay off good but you could potentially lose what you have accumulated too!
Other things you’ll want to consider is how the providers reports on your earnings and if they have software that you can access online to check on your account in real time. Typically there are only a few times per year when you can change the funds you have your money allocated into so you’ll want to be sure you are aware of when these are and be cognizant of market conditions so you can switch your investments accordingly.
Finally you want to be aware of your retirement plan providers background so you can be sure they are reliable and give great service. Also, be sure to review the performance of the investments in the plan so you can be sure to have your money in the best investments for your situation.
401K
The typical company offers a 401K plan. Named after the IRS’s section 401K, this plan allows employees to set aside tax deferred money out of every paycheck. This is a flexible plan that allows you to determine how much you want to set aside each pay period as well as several choices of where the money will be invested. This is a great way to save for retirement since the money you contribute comes out of your pay before taxes giving you more to save. Some companies even match your contributions!
If you want the most money you can get at retirement you should contribute the maximum amount which is up to 15% of your yearly earnings up to $15,500 (2007). This is the amount limited by the IRS and you may also be subjected to limits by your particular company.
It’s also in your best interest to start saving for retirement as early as you can - from your first job on. Even if it seems like you cannot afford to have any money deducted just a little bit will add up over the years and once you start making contributions you won’t even miss the money!
Before you join any retirement plan, you need to read the prospectus and review the track record of the plan provider. Look at all the options - typically they are categorized as low risk, medium risk and high risk and you can divide your money into each plan according to your comfort level. Remember, high risk plans might pay off good but you could potentially lose what you have accumulated too!
Other things you’ll want to consider is how the providers reports on your earnings and if they have software that you can access online to check on your account in real time. Typically there are only a few times per year when you can change the funds you have your money allocated into so you’ll want to be sure you are aware of when these are and be cognizant of market conditions so you can switch your investments accordingly.
Finally you want to be aware of your retirement plan providers background so you can be sure they are reliable and give great service. Also, be sure to review the performance of the investments in the plan so you can be sure to have your money in the best investments for your situation.