Investment Updates
Do You Know The Basics Of 401(k) Retirement Plans?
Published Thursday, December 19, 2013 at: 7:00 AM EST
How much do you know about your 401(k) plan? Often, even though employer-sponsored retirement plans may make up the bulk of employees’ retirement savings, participants understand less than they need to about how this savings vehicle works. Here’s a primer covering 10 crucial facts:
1. You benefit from tax-favored treatment. For starters, contributions to your account are made on a pre-tax basis. For example, if you earn $100,000 a year and elect to defer $10,000 to the plan, you’re taxed on only $90,000. What’s more, the money you’ve contributed will grow, without taxes, inside the plan until you withdraw it.
2. There's an annual limit on how much you can contribute. The normal ceiling, adjusted each year for inflation, remains $18,000 for 2017. Plus, you can sock away an extra $6,000 a year (also adjusted for inflation) if you're age 50 or older. That adds up to as much as $24,000 for 2017. However, other tax law limits could affect your overall contribution.
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