3 reasons you should set up a 401(k) account, according to a local professional

Wondering if you should enroll in that 401(k)-plan offered by your company? The answer is yes. Helping people in the Pleasanton area retire comfortably is something I’m passionate about as a financial adviser. There are many ways we create plans suited to your personal goals, and in most cases, this includes taking full advantage of a 401(k). Here, we’ll talk you through what exactly a 401(k) is, how it works and three reasons you should invest in a retirement savings plan. 1. Tax savings One of the biggest benefits of a 401(k) plan is that you’re able to contribute income before taxes are deducted from your paycheck. Since 401(k) accounts are set up by your company, the only people who can take part in these investments are employees of that organization. After choosing the amount you’d like your employer to contribute to your 401(k) with each paycheck (usually expressed as a percentage of gross pay), it will be withdrawn before tax. The result? You’re able to save up more for retirement than you would by investing your own, post-tax income. Some companies will give you the option to contribute into a ROTH 401(k), which is funded with after-tax income but isn’t taxed upon withdrawal. The advantage here is you will likely be in a smaller tax bracket when the money enters the account, and therefore you save a great deal when you withdraw it later in life. In either case, a 401(k) can offer great tax benefits. 2. Company match Another reason to set up a 401(k) rather than invest on your own is because often, your company will match the amount or a portion of what you contribute. That means, a certain percentage of gross pay you contributed to your account will also be contributed by your company. So if your company has a 401(k) program, you have the opportunity to increase your retirement savings with every paycheck. Most advisers would suggest contributing at least as much as your company agrees to match, if you have the means. It’s an easy way to help maximize your savings for retirement. 3. Earn additional interest Like any investment account, interest compounds in a 401(k). The sooner you open your account, the more time you have to build interest. Funding a 401(k) plan has the potential to produce long-term returns, so you can get even more out of the account once you retire, but remember it is a market based investment with the potential for losses as well. This benefit, along with the tax discount and company match, builds savings that will help you prepare for a secure and enjoyable retirement. You’ll be glad you made the decision to invest in a 401(k). I’m located right here in the Bay Area and available to assist you with retirement planning and any other financial goals you have. If you have further questions or want to learn more, give me a call or check out our website for all of the ways I can provide support. * Securities and advisory services offered through MWA Financial Services, Inc., a wholly owned subsidiary of Modern Woodmen of America. Member: FINRA, SIPC.