The Basics of a 401(k) Plan

When it comes to retirement planning, there are a variety of options. And if you're just starting out, a 401(k) plan might be an excellent option for you. MarketWatch shares all that you need to know about 401 (k) plans and how to start saving with them.

A 401 (k) is offered by employers as a way for employees to start saving for retirement. As of 2019, employees can contribute up to $19,00 in their account. Two of the most popular types of 401 (k)s to choose from include traditional and Roth. It's important to note that traditional 401 (k) plans are funded with pre-tax money from each paycheck. This will lower your current taxable income, but you will have to pay taxes in the future when you take money out during retirement.

On the contrary, Roth 401 (k)s are funded with after-tax money. This means that your withdrawals will be tax-free when you reach retirement. This option will make more sense if you foresee yourself retiring in a higher tax bracket than you are in now.

When it comes to actually enrolling in a 401(k) plan, every company's policy is different. You might not be able to enroll the first week or even month you're with the company. In some cases, you may have to wait six months to a year for eligibility. MarketWatch suggests that when you can start contributing money to your 401(k), you should ask your employer if they'll match your contributions. This is beneficial because a match is a return on your investment.

MarketWatch shares more knowledge on 401(k) plans on how you can get get started saving. As always, consult with your financial advisor to make sure you are making the best decision for your retirement. Overall, the workplace is a great place to start saving!

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?Have you started saving for retirement? If so, what do you think about saving with a 401(k)? Share in the comments below!