A 401(k) is a savings plan that helps people save for retirement. It is tax-friendly and is named after a part of the Internal Revenue Code. Your plan contributions are taken out of your paycheck, and the money grows tax-free until you take it out in retirement. That means you don’t have to pay taxes on the money you put in or the money you make from your investments.
These plans are a good way to save for retirement, and more and more people are signing up for them. In 2021, about 51% of private industry workers participate in a 401(k) offering from their employer.
The Benefits and Risks of a 401(k)
One of the most popular ways to save for retirement is through a 401(k). But like any other investment, there are risks to think about. In this post, we’ll talk about the pros and cons of a 401(k) so you can decide for yourself if this type of retirement savings account is right for you.
The Benefits of a 401(k)
A 401(k) is a good way to save for retirement because it has a number of key benefits:
The Risks of a 401(k)
This retirement savings plan has many good points, but there are also some risks to think about:
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