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Do You Have Enough Choices In Your 401k?

By Amiri C. Baraka

A 401k plan is the most common retirement plan that people take out. Currently you can invest up to 15% of your salary into the fund. The money you invest is pre-tax which means it lowers the amount of tax you are paying out of your salary.

Another great benefit id that your employer will usually match your payments, effectively giving you free money! Sometimes they will give you a percentage of what you are paying in, but many times they will match your contribution dollar for dollar, effectively doubling the amount you are paying in.

An IRA or Individual Retirement Account is quite a different beast. You’ll discover that there are much stricter terms and conditions on IRAs compared to a 401(k). To start with if your employer offers a 401(k) you would have be earning very little to qualify for the ax deductions allowed.

There’s no denying that planning for you financial retirement can be daunting and confusing at the best of times. It’s no wonder that many people make crucial mistakes when trying to deal with their retirement plans. But don’t worry, here I will outline the most common errors people make when planning their 401(k) retirement fund.

The chances are that some of your 401(k) will be invested in the stock market. As we all know markets can be unpredictable and if you take your eye off the ball, your savings could be wiped out in an instant. It’s not worth risking your retirement funds on volatile stocks that seem to promise a hog return if you stay invested. It’s a much better policy to back larger established companies that have been around for may years and have transparent balance sheets (unlike some of the major investment banks that crashed in 2008).

You must get a full match by making your side of contribution to the 401(k). The employer 401 (k) plans usually make contribution of 50 cents for each dollar you give, and up to six percent of the income you have. In order to get full benefits, you must make it a point to contribute as much amount as your employer is contributing.

It seems like as every year passes people have to work longer before they can afford to retire. It is no secret that most Americans are not financially prepared to retire and that most people spend more time planning their vacations than they do their retirement. What can you do to make things better for yourself financially?

If you save $200 a month beginning at age 25, with the miracle of compound interest, you will not have to do much else to be ready for retirement. There is nothing better than having 40+ years ahead of you to save money. Although some companies have dropped the match to stay financially viable, most companies still match at least the first 3% of what you contribute to your 401K. This is free money and there is no better kind. Because it is before taxes, you will most likely not even miss 3% of what you are making that will be going for your retirement. You should be contributing to your 401K at the amount that your company matches.

Many people will be working longer than individuals in the past, but we will also be living longer. Find something you enjoy doing and consider making a part time business out of it and this will give you further options during your golden years. As long as you plan for the future, you will be headed in the right direction.

We all need to save for retirement because none of us can avoid growing old. Most articles are written with the gainfully employed in mind, but what about the self-employed individual? Fortunately, there are plenty of options for you as well.

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Article Citation
MLA Style Citation:
Baraka, Amiri C. "Do You Have Enough Choices In Your 401k?." Do You Have Enough Choices In Your 401k?. 23 Jul. 2012. 27 Jul 2014 <>.

APA Style Citation:
Baraka, A (2012, July 23). Do You Have Enough Choices In Your 401k?. Retrieved July 27, 2014, from

Chicago Style Citation:
Baraka, Amiri C. "Do You Have Enough Choices In Your 401k?"

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