Maximize Your 401(k) Opportunities

If you are employed by a company offering a 401(k) retirement account, then taking advantage of what is generally an opt-in offer is essential to your wealth building strategy. Funds contributed to your 401(k) earn interest and are not taxable until withdrawn. Read on and we'll take a closer look at how you can maximize your 401(k) opportunities.

Free Cash - Your employer is essentially giving you free cash when you participate in a 401(k) plan. Sign up and some plans will automatically drop in profit sharing on a quarterly basis irregardless of whether you make a contribution or not. You can only get profit sharing monies if you have a 401(k) plan that is active.

Nice Match - Many employees will match your contribution up to a certain amount. For example, if you put one dollar in your 401(k), your employer may match that amount by contributing 50 cents or more. Where can you earn 50% on your interest? It isn't possible! Matching contributions are typically made from 4 to 12 percent of your salary.

Tax Free - Monies in your 401(k) accumulate tax free until you retire. Sure, if you make permanent withdrawals in advance, you could face some hefty tax payments. So, wait until retirement to make withdrawals and you could have a nice nest egg to see you through your golden years.

Not Missed - You are more likely to save for your retirement if the funds are removed from your paycheck beforehand. Your 401(k) will deduct monies automatically from your paycheck and deposit them into an account that you have selected. Best of all, the monies could drop you into a lower tax bracket, further strengthening your overall financial picture.

Loan Source - Some employers allow employees to borrow money from their 401(k) plans. While typically not recommended, this can be an option for employees who need to finance a car purchase, a home repair, or pay for their child's education. In most cases you'll be charged interest on the loan, but you'll be paying that interest back to you, not the company. Beware: unpaid loans will be treated as a withdrawal and could result in major tax penalties and payment assessed to you by the IRS.

That's it! A 401(k) plan is a great idea, but you must be in it to win it. Take advantage of your company's 401(k) plan and you'll be well on the road to providing the retirement nest egg that you deserve.