They’ll often tell you that the secret to accumulating wealth is not hard work, or skill, or dumb luck. The secret is something far more straightforward that almost anyone can make good use of.
Are you ready for the secret?
Two words: compound interest.
What is compound interest?
So let’s say you set aside a portion of your weekly income into an account. The account will not be stagnant, no. It’s going to fluctuate, ebb, and flow with market movement. So we’re understanding that the money will be subject to change over time based on market performance.
Super.
Now let’s take things one step further. The funds in the account, however they may grow or diminish as time goes, will accrue interest. Meanwhile, you’re still putting money in on a regular basis.
What is the result? You get interested in the money. You get interested in the gains from the money. You get interested in the interest from the money you added to the money.
Confused? It’s simpler than it sounds.
By harnessing the power of compound interest, that little bit of extra cash that fell into your account from simply having it invested grew a little, then a little more, until it became a big deal. By regularly investing, you have created significantly more wealth than you would’ve had if you had held that money otherwise.
That, my friends, is the power of compound interest.
How does the 401(K) come into play?
So remember that hypothetical account we talked about above? That’s actually exactly what a 401(K) is. Employees are eligible to deposit pre-tax income into an account that performs as the market performs. The funds may be allocated to stocks, bonds, ETFs, equities, and mutual funds as you or your financial advisor see fit.
To make things even better, many employers will contribute to your 401(K) and match a percentage of your contribution. This is great because, for one, it encourages you to plan responsibly for your retirement and your future. But also, it’s free money!
What’s better than free money?
It All Depends on the Benefits Package
Anyone is able to create a 401(K) or another investment account like an IRA or Roth IRA to grow their money passively and prepare for retirement, but the most popular method is the employer-based 401(K) because of the simple and easy application and company match possibility.
Finding out about the 401(K) plan is of paramount importance when interviewing and considering employment with a company. Companies that hire Employee Retention Benefits have ample options available for different 401(K) plans, so they are bound to offer something competitive.
Set aside pre-tax income for your 401(K) today and you’ll reap the rewards for years to come.
