5 Great Reasons To Invest In A 401k
A 401k is a powerful tool which allows the average person to save up some money for their retirement. In fact there are 5 reasons why investing on 401k plans can be the best options for most people.
But before we get into those reasons we should can take a look at the question, what is a 401k? This is simply a retirement plan that employee can use to save a portion of their paycheck and have it grow tax free until retirement comes around. This plan has helped out many people since it was created for these simple reasons.
1. Tax Free
The best part about the plan is that it allows for a tax free rate of return on your money. Of course you do have to pay taxes on your money when you eventually pull it out, but while it is in the account it is enjoying growth without being slowed down by taxes.
2. Employers May Add Money
A lot of employers will give you some sort of insensitive for saving up for retirement for instance they may depsit some more money into your account for every $1 you invest into it. If your employer decides to match you 1 for 1 and you invest $700 into your 401k your employer would then deposit an additional $700 into your plan, it is free money.
3. Average Stock Market Return
The yearly average stock market return is around 10% that already beats many other forms of investing. Combining this with the free money you could receive and the tax free growth it has a good potential.
4. Managed Safely
A 401k can bwe used as a safety net because the money inside it is ususally managed as safely as possible. So if you have a 401k you know you will always have some money there just in case you ever wind up in an emergency situation where you need it.
5. Hardship Withdrawals
There are many 401k hardship withdrawals which will let you take money out during certain emergencies. You can also use the 401k hardship rules to get into a first home or even pay off some college loans without getting hit by the normal 10% penalty that comes with an early 401k withdrawal.
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