What is a 401k Plan?

A 401k is a retirement plan that is sponsored by your employer and funded by you. Money is deducted pretax from your pay. The majority of employers will offer a matching contribution. Generally up to 6%. This is free money. If your employer offers a matching contribution make sure you take advantage of this. For instance if you contribute 6% and your employer contributes a matching 6%. That's 6% more going towards your retirement that you wouldn't have otherwise. For Free.

You will need to make the investment choices for your contributions to go into. Normally, your employer's 401K plan will offer you a number of investments for you to choose from. On occasion you will be able to choose from a wide range of options that are offered through the plans administrator. Generally, you can go to the company that manages your 401k. For instance, Fidelity houses a lot of 401K's. Find out who is managing your 401k and make an appointment to get help if the choices get to overwhelming for you.

Do some research on your own too and decide how you want to invest your money. You will need to determine your risk tolerance. Usually, the younger you are the higher risk tolerance you can have. As you get older you may want to start moving money to less risky investments.

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

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