What is the value of your 401k?

Wellman Shew
3 min readFeb 9, 2023

A 401k is an employer-sponsored retirement savings plan that provides tax advantages for savings. It’s also an excellent strategy to save for retirement. Experts advise saving 10% to 20% of your gross pay for retirement. If your employer matches 401k contributions, you should contribute as much as possible to maximize your match.

The retirement savings plan offered by your company is a tax-advantaged way to save for retirement. These are often 401(k) plans, although you may also have a 403(b) or 457 plan.

The most common are 401(k) plans, which provide employees with a federal income tax credit on their contributions. You may put the money in mutual funds, equities, bonds, or ETFs and let it grow tax-free until you withdraw it in retirement.

Your company may match up to a particular proportion of your 401k contributions, which is known as dollar-for-dollar matching. The matching amount is determined by your annual donation. This is a win-win situation for both you and your company. It’s also an excellent strategy to guarantee you have a comfortable retirement fund.

If you’re like the majority of individuals, your 401k is a tax-advantaged account that provides an additional layer of financial stability for your retirement. Depending on the kind of plan, you may not have to pay income taxes on investment growth, interest, or dividends while participating in the plan or while withdrawing funds from it in retirement.

However, not all 401ks are made equal, so you should be cautious about the assets you pick. This is known as asset placement, and it is one of the most critical things you can do to ensure that your savings grow tax-free in the future.

A 401k can further boost your savings by allowing you to set away pre-tax income for eligible medical and educational costs. These accounts, known as Health Savings Accounts (HSAs) and 529 Plans, provide you with the best of both worlds: a tax benefit upfront to decrease your income taxes and the opportunity to save money without paying any taxes on it in the future.

A 401k is a type of savings account that allows you to save money tax-free. The money you put into a 401k is invested in bonds and other assets, and the capital gains you receive grow tax-free until you take it, which is generally after retirement.

A 401k, as opposed to a savings account, provides greater flexibility and liquidity. It’s also a superior option for investing for retirement or other long-term goals that need a longer time horizon.

To be effective, a savings strategy must match your goals and financial condition. For example, if you’re attempting to save for education, a 529 plan may be preferable to a 401k. Similarly, if you want to save for an emergency, a savings account may be preferable to a 401k.

Many firms provide their employees with 401(k) plans, which are tax-advantaged retirement savings accounts. Employees can contribute a portion of their earnings to these accounts, and their contributions may be matched by their employer.

A 401(k) plan can be a terrific method to save for retirement, depending on your circumstances. You can put your money into stocks and other tax-deferred investments.

It is critical to remember that all investments have risks and may lose value over time. However, investing in a 401(k) over the long run can help you avoid market losses and attain more financial stability when you retire.

In some circumstances, such as paying for your spouse’s schooling or medical bills, a 401(k) plan allows you to withdraw cash without penalty. You should ensure that you are investing enough in your 401(k) to satisfy your retirement expenses. Speak with an expert about your best alternatives.

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Wellman Shew

Fresno resident Wellman Shew has worked in the California health insurance and employee benefits industries for many years as an entrepreneur & business leader