What is a 401(k) Plan and Why Should You Have One?

What is a 401(k) Plan and Why Should You Have One?

Investing in a retirement plan may not be at the top of your list of things to do today, but it should be. Seriously. With most employers offering an easy to navigate, low-risk employee 401(k) plan, this is definitely something you should be taking advantage of. Savvy millennials know that making smart investments now will lay the groundwork for a bright financial future.

What You Need to Know About 401(k) Plans for Successful Investing

Aptly named after the IRS Tax Code Section that provides information on 401(k) savings plans, this employer-sponsored retirement plan is a great way for young professionals to begin to save money for their later years. The 401(k) plan is basically the newfangled company pension plans of the past, and it is smart to invest in it.

There are tremendous benefits of investing in a 401(k) savings plan and now is the time to take advantage of the opportunity. Investing now, while you are young, is the perfect way to ensure a secure financial future. Consider these 401(k) benefits for your success.

Benefits of a 401(k) Savings Plan

  • Free Money. It is true. Most employer-based 401(k) plans offer a matching contribution to encourage employees to participate. It is smart to contribute at least the percentage they are willing to match, to see your savings add up!
  • Tax Breaks. All money deposited into your 401(k) plan is tax-deductible, meaning that all yearly contributions are not figured into your gross income, lowering your taxable income. In addition, the money you invest grows tax-deferred in a 401(k) plan, versus it being taxed on dividends or interest in a savings or brokerage account at the end of each year.
  • It’s Virtually Effortless. Really. All you must do is sign up and complete the paperwork and your employer will automatically deduct your contributions from your paycheck. Done. It’s really that simple.
  • Consider the Options. If you are looking to aggressively invest in a long-term savings plan, it is helpful to know that you are allowed to contribute more money to a 401(k) than to an IRA. This is a huge consideration for those looking to quickly grow their portfolio.
  • Dismiss Large Minimum Investment Requirements. Many mutual funds have minimum investment limits that can be quite substantial for a young professional. For those who want to plan for their future but don’t have thousands of dollars for the minimum investment, these mutual funds require, a 401(k) plan lets you invest in similar types of funds with no minimum out-of-pocket investment.

The team at We Florida Financial is here to help young Florida professionals get established and navigate their way to financial security with a variety of different types of investment, savings, and retirement accounts for long-term planning and benefits. Contact We Florida Financial today at (954) 745-2400 or connect with us online here to learn about our member benefits and how we can work together to secure your future.