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So what are the benefits of a 401(k)?
Heres everything you better know to decide whether this option is best for you.
What Are the Benefits of a 401(k)?
It may offer a dollar-for-dollar match or a percentage of your contribution.
This is effectively free money.
Its an incentive from your employer to save for retirement.
Thats because the money you deposit benefits from compound growth.
The more money in your 401(k), the faster youll make money from investment growth.
If you could swing it, you should contribute the maximum annual amount to your 401(k).
That means up to $23,500 per year.
At the very least, strive to deposit as much as your employer is willing to match.
see to it you diversify your investments to safeguard against adverse market turns.
401(k) loans are a popular option, allowing you to spend your money without penalty.
The catch is that you must pay back your loan, often within five years.
Youll pay interest, but that money will also deposit into your 401(k).
Another popular choice is an Individual Retirement Account.
instead of through your company.
In other words, you wont get any employer contribution matches.
With a Roth IRA, youll pay taxes on the money first, then deposit it into your account.
Final Thoughts: Are 401(k) Benefits Right for You?
With little exception, you should take advantage of a 401(k) if your employer offers it.
And its high annual contribution limits are exponentially greater than some other retirement accounts.
Still, its worth examining other retirement plans to find the best plan for your unique financial situation.
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