Think ahead with a 401k retirement plan

When is the last time you thought about saving for retirement? Once you’re ready to step away from the full-time workforce, you’ll need to rely on more than just Social Security for income. That’s why it’s important to start saving for retirement, no matter your age. Opening a retirement account – such as a 401k – can provide you with a long-term savings plan. Here are a few things to know about a 401k retirement plan.

What you contribute is untaxed

Contributions to a 401k account are untaxed. You only pay tax when you make withdrawals or distributions from the account. The contributions might also chip away at your annual tax liability if you contribute enough money to make a difference in your adjusted gross income at the end of the year. Please consult your tax advisor for details.

Start early and contribute at least the company match

Check with your employer to see if they offer a company match to what you contribute. And start that 401K sooner rather than later. The New York Times recently had journalism students speak with many current retirees about their financial situation. Several wished they had started contributing to their retirement accounts much earlier in life. Watch the New York Times video here.

Don’t withdraw funds, as much as you’re tempted too

Your retirement funds will compound with time. Say that a person at age 25 has $10,000 in their retirement account. Now their friend of the same age has $30,000 saved for retirement already, a significant head start. Both contribute $5,000 annually to their 401k with an average rate of return of seven percent. With all other major factors the same, the friend who had the head start and the higher balance at 28 will have $384 per month to spend on retirement.

Watch your funds grow over time and keep contributing

If you’ve taken time to wisely choose investments with a financial consultant (although that’s not a guarantee they’ll perform well) you’ll probably see your money grow over time. Stay focused and don’t stop saving!

Travis Credit Union offers a 401k program with an employer match. Ready to join our team? Visit www.traviscu.org/careers to see our latest job listings and apply.

New York Times video Current Positions