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What is a 401(k)?

401(k)’s are retirement plans offered by an employer.

If your employer does offer a 401(k) plan, you can elect to open an account. All you have to do is tell your employer how much money you want to contribute (usually in the form of a percentage of each pay check) and your employer will take care of it from there. Sometimes companies will offer a match to your contribution, but each company is different – so be sure to ask if they offer a match & if yes, what percentage they match.

Types of 401(k)'s:

While there are several different 401k options, two that are commonly used are the Traditional 401(k) and the Roth 401(k). Both come with tax advantages – which we love.

Traditional 401(k) contributions are made pre-tax, it grows tax-deferred, and you pay taxes when you take the money out. Roth 401(k)’s contributions are not tax deductible, but the money you take out is tax free. Everyone’s situation is unique – so if you have a choice between a Traditional 401(k) and a Roth 401(k) we recommend speaking to an adviser or accountant, who can help you choose which is best for you. 


So what if my employer doesn't offer a 401(k) or I work for myself?

That’s not a problem! 401(k)’s are not the end all be all - there are other options! We’d encourage you to speak with an adviser about what may be the best choice specific to you & your goals.


Regardless of which plan you decide on, the best thing you can do for yourself is to start NOW. Retirement saving plans should really be started as soon as possible (Hello under 30 year olds!) because this is not an area you can afford to leave until the last minute. Contact a financial adviser today for help on choosing the best plan for you!

CNBC | A Roth 401(k) Offers Tax Advantages. Here's How it Works.

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CNN Money | The Ultimate Guide to Retirement

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