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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Thursday, July 27, 2006

Advantages of 401k Investing

Company-sponsored 401k plans can be very beneficial to your retirement. The following are some advantages to participating in your company's 401k plan.


1. Participant Control:

  • You get to decide how much you will invest each pay period up to the IRS's annual limit
  • You get to choose how to invest your money
  • The assets in your 401k plan belong to you, so you take your vested accumulated plan assets with you if you leave the company
2. Pre-tax Investing:
  • The funds you contribute to your 401k plan is deducted from your paycheck before income taxes are considered. This will allow you to reduce the amount of taxes you pay
3. Tax Deferral:
  • You owe no taxes on the 401k investments until you withdrawal it from the plan.
4. Tailored Investment Plan:
  • You can customize your plan to meet your needs according to your age, time horizon, wealth objectives, and risk tolerance

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