Advantages of Setting up a 401K in Colusa
Everyone wants to retire early, or at least on time, but surprisingly few workers begin saving for retirement early. Younger employees often make excuses for putting it off until their student loan debt is paid off, or other financial obligations are met. The smart thing to do, though, is to set up a 401K in Colusa as early as possible in order to reap the most benefit from it. Read on to find out why.
Higher Contribution Limits
A 401K is a particularly useful investment tool for anyone interested in planning for his or her retirement because it allows contributions to be made on a pre-tax basis. Compared to other tax advantaged retirement plans, a 401K allows employees to save a much more significant amount of money. In fact, in 2017, employees under 50 can contribute as much as $18K. Compare this to the $5,500 limit for a Roth IRA, and it’s clear why a 401K is preferable.
A 401K is the closest thing to a free lunch when it comes to retirement planning. Most employers match employee contributions up to a point, which allows them to save twice as much as they would be able to on their own. That’s literally free money, and there is no reason not to take advantage of it.
Not all employees have heard of the Employee Retirement Income Security Act, passed in 1974, but almost all of them can benefit from it. The most important thing to know about it is that it protects qualifying assets from creditors should an employee need to file for bankruptcy. While IRAs have some protections under other acts, ERISA backed 401K plans will be protected no matter what.
Not all plans allow for indefinite tax deferments. Most retirement accounts require employees to begin withdrawing money by the age of 70.5, even if they do not intend on retiring. With a 401K, though, eligible plan holders can defer withdrawals until retirement.
Interested in learning more about 401Ks and other forms of retirement investing? Get more information about how to set up a 401K in Colusa online today.