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Five Benefits of participating in your company's 401(k) plan

Planning for your retirement requires you to make the best financial decisions possible today. Previous generations of retired individuals relied on company pensions as a primary source of retirement income. Today, as more companies do away with pension programs, the 401(k) plan is the method of choice for many of us to establish our nest egg. Company provided 401(k) plans offer various benefits to help you prepare for your retirement. Here are five reasons why you should contribute to your 401(k) plan.

1.You pay yourself first-Many of us have good intentions of saving for the future but we find ourselves taking care of bills and other routine expenses first. As are result, we find ourselves having little to nothing left to put aside for our retirement. When you enroll in a 401(k) program, your deductions are withdrawn automatically with little to no effort on your end. You will be surprised at how quickly the money grows over time. Best of all, money grows in a tax-deferred account so the taxes taken from your paycheck is reduced while you pay yourself.

2.You get free money-Most employers will offer a company match to attract talented candidates. The company match is free money which you can use to boost your retirement amount. If your employer is offering .50 cents match for every dollar you save, that is a 50% return on your money! Better yet, a dollar-for-dollar match is 100% percent return on your money. Where else can you get those types of returns on your investment? Do you feel that you are not getting paid what you are worth at your job? I recommend that you contribute at least up to the maximum percentage which will allow you to take full advantage of the company match.

3.You can use it during emergency-The money in your 401(k) account is set aside for your retirement. But did you know that you can also withdrawal the funds in the case of hardships such as unforeseen medical expenses, funeral costs, and home repair deductibles relating to a casualty loss. If the money is withdrawn before you are 59 years of age, you will be subject to an additional 10% excise tax unless your company allows you to repay the loan through paycheck deductions. In essence, you are paying yourself back with interest from your paycheck. As you pay yourself back, your money is replenished for when you need it. Contact your local benefits administrator for additional information about the details of early withdrawal.

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