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What Is A 401k?

| March 13, 2018
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Did you know that the average American is extremely behind on savings? Most Americans are unable to afford a $400 emergency if it were to come up. With so many companies turning away from the common pension plan, the average American needs to make other plans for their retirement funds. However, many people tend to not be as successful in saving due to a few reasons. For instance, one reason is the decline of people in rich countries saving across the globe or because the poor and middle classes in America are ill prepared for retirement. Another reason for poor savings could be because saving money is a relatively new occurrence. Speaking of retirement, only about half of the people throughout the United States have a retirement plan in place.

At Gate City Advisors, our wealth management services are focused on retirement planning and 401k for companies. We can help you plan a map to help you reach the financial goals that you have in mind by the age you want to retire. Located in beautiful Greensboro, we strive to help you plan for any type of financial occurrence. From divorce planning to asset allocation services, Gate City Advisors wants to help you plan for the long term and join the Americans who are prepared for retirement. For more information on our retirement planning or our wealth management services, then take the time to reach out to us.

A 401k Is…

If you’re thinking about retirement, then the first thing you need to consider is a 401k. A 401k is a type of retirement plan that is generally sponsored by your employer. This retirement savings plan can be set up in a myriad of different ways depending on what your employer wants to do. Its main priority is to allow you to save by investing in money from your paycheck that you determine yourself. For instance, if you’d only like to put 10 percent in your 401k, then you can. Some people choose a percentage and others decide to do a monetary amount. The goal of a 401k is to allow you to save from your paycheck before any taxes are taken out. In addition, you won’t have to worry about paying taxes until the money in your 401k is withdrawn.

401k plans started to become more and more popular during the 1980s because it was to supplement the pension plan. The name 401k was determined by the tax code that is responsible for this retirement plan. Prior to the 1980s, many employers would use pension funds, which were managed by the company. Over time, the pension funds were given out in steady amounts during the retirement. Due to the increase of costs for pension plans, people began to replace them with 401ks.

While pension plans have been the preferred method of retirement, 401ks allow you to control your money and determine how it’s invested. Many 401k plans will spread the mutual funds through money market investments, stocks, or even bonds. In today’s day and age, most people tend to lean toward the target-date funds, which is a combination of stocks and bonds that gradually increase as you move toward retirement.

How You Can Benefit From A 401k

401ks are so beneficial because they help you prepare for retirement. Regardless of what portion of your life you’re in, one day you will reach retirement and the last thing you’ll want to do is to get up to go to work. The benefits of 401ks vary from your employer matching your portion of retirement funds to helping to lower your income taxes. Here are some other ways a 401k retirement plan can benefit you:

  • There are pre-tax contributions that make putting money into your 401k less painful
  • Investments in your account can grow unimpeded for awhile
  • There are various types of 401ks that you can choose from depending on the company you work for
  • If you leave your job, then you can take your 401k money with you or roll it into an IRA

Now that you know what a 401k is, are you ready to get started on saving for your future? Make sure that you plan accordingly for retirement by choosing Gate City Advisors.

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