401k savings jar

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When it comes to investing, those not involved in the finance industry usually scamper away from words like “investment portfolios” and “401(k)s.” However, American’s should educate themselves and take an active role in their financial futures, especially if they’re one of the 51 million American’s putting their hard-earned money into a 401(k) plan.

Here is a list of some of the most common questions surrounding the topic of 401(k)s and easy answers that anyone will be able to clearly comprehend!

First and foremost, what is it?

  • A 401(k) serves as a retirement savings account which is directly sponsored by your employer. Offering a myriad investment options to give you more control in how you save for your financial future, it gets its name from the subsection of the Internal Revenue Code it is defined in.

Options? What sort of options?

  • It all depends on the plan offered by your employer, but on average, most plans includes a variety of mutual funds to chose from as well as other options such as stocks, bonds, and any other investment vehicle that’s allowed under the plans provisions. You’ll be able to chose which funds are wise to invest in now as well as how much money you’d like to allocate to your 401(k) from each paycheck.

Which options yield the best results?

  • This choice is important to consider on a case-by-case basis. Everyone’s familial and financial circumstances are different, and your investment options should reflect that. Other factors to take in account includes age, how much risk you can afford, and the conditions of the current market, to name a few. Your employer will provide educational resources on your 401(k) plan and investment options, and I encourage you to study them extensively and set up your account with Financial Guard in order to help you finalize these big decision and update them over time.

I keep hearing the phrase “employer match” –what is that?

  • Often times, certain plans have employers match a certain percentage of what you put towards your 401(k) each month–saving you more money in a shorter period of time. When your 401(k) plan includes an employer match, my best advice would be to save at minimum what the employer match may be. If you don’t, you’re essentially giving away free money.

How much can I put into my 401(k) plan per year?

  • The current maximum contribution sits at $18,000 per year.

To get more advice for your financial future, visit Financial Guard’s blog!