Definition
A retirement savings plan offered by many employers. You contribute money from your paycheck before taxes, and it grows tax-deferred until you withdraw it.
What to consider
- Check your contributions regularly and adjust as your income changes.
- Remember that every little bit you put in helps build your future.
- Learn the rules for withdrawals early so you know what to expect later.
Real world scenarios
- Mariana enrolls in her company’s 401K plan on her first day, opting to contribute 5% of each paycheck. Over time, she watches her balance grow through consistent deposits and market gains.
- Daniel checks his 401K statements quarterly to ensure his asset mix aligns with his retirement goals. Small adjustments help him stay on track without taking on too much risk.
- Chris uses automatic increases to boost his 401K contributions by 1% each year. This gradual approach helps him save more without noticing a big drop in take-home pay.
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