You’ve heard it many times – how crucial it is to save for the future and set up financing for retirement. Contributing money to a retirement account is one of the most productive uses of your income. Many individuals are even contributing to more than one type of retirement account. From IRAs to Health Savings, there are multiple retirement accounts ready to assist you in building a successful financial future.
Understand the different accounts and choose the plans that best suit your needs. Let’s dive into the 411 for 400 plans of retirement. The three 400 plans listed below are among the more common plans offered by employers to their employees.
401(k) Plan
A traditional 401(k) plan is one of the more common retirement savings and investment plans that employers offer their employees. These plans are often favored by employers for its low costs compared to traditional pension plans; and are favored by employees for its higher control over their retirement income. Many employers offer contribution matching, up to a certain percentage as well. Utilize the matching capabilities to increase the money you save over time.
403(B) Plan
This type of retirement plan is designed for employees of nonprofit organizations including hospitals, public foundations, local governments, churches, museums and research organizations. For this retirement plan, contributions are usually made from employees’ elective deferrals, meaning money is pulled directly from one’s paycheck at a rate agreed on by both employee and employer.
457 Plan
A 457 Plan is a type of defined contribution retirement plan. There are two types of 457 Plans, governmental or non-governmental. You must be an employee of a tax-exempt 501(c) organization or state or local government to be eligible for both. The main advantage of these plans is that the money diverted is not taxed and it grows tax-deferred while in the plan. Chances are, if you’re eligible for this plan, your organization will also offer a 403(b) or 401(k). Take advantage of all available plans, you’re allowed to participate in more than one savings plan.
Whether retirement is quickly approaching or years away, it’s never too early to start saving. Educate yourself on the importance of saving for the future, understand your options and prepare yourself for retirement. It will be here before you know it!
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