investing in your future

Employer-Provided Retirement Plans

Employer-sponsored retirement programs, like the 401-K, are an invaluable tool for building retirement income. How do 401-K plans work?

1. You have a certain percentage withdrawn from each paycheck and contributed to an independent firm for deposit in a retirement account.
2. Each year you place one paycheck in a designated savings account to hold for the future.
3. Each quarter, you place 10 percent of your paycheck in a retirement account.

“A” is correct. You can only contribute a certain amount to your 401-K plan each year. Given the tax benefits, it makes sense to start contributing as early as possible and to pay in as much you can. Your employer may even match a certain amount of what you put in. If you change jobs, the same plan may not continue, but you may be able to “roll” your contributions over to your new employer’s plan. Beware of cashing out early. If you do, you will deplete your nest egg and have to pay extra income tax.