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Retirement Planning: 401K & Individual Retirement Accounts Explained


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401k individual retirement is a form of retirement investment offered to a person by their employer. The employer matches a percentage of the employees’ investment up to a certain amount. This is usually about 3% to 6%. After a predetermined amount of time by the employer, the employee can contribute funds to this plan. This also depends on the employer’s income. The employee usually has a choice as to where he can allocate his investment funds to. He also has a choice of stock options as well. The money is pre-taxed money taken from the employee's income and is also tax deferred.

After the employee is 70 and a half (1/2) years of age the employee must begin taking small amounts of money out of the 401k individual retirement plan, unless the employee is still working. The small amounts of disbursements taken out of the 401k individual retirement will then be taxed. If the employee took a disbursement of any of the money from the 401k individual retirement plan before the proper period of time, there are very extremely large penalties involved, unless there are special circumstances or reasons for withdrawal.

A 401k individual retirement account is different from other accounts and can be explained in retirement plan seminars sometimes offered by the investor's employer. Topics can range from particular plans such as the 401k and profit sharing plans as well as retirement plans. They also may offer suggested ways of investing funds and various ways to increase the amount in these plans. With minimal cost to the employee or ways to increase the amount of the fund to better benefit the investor. If offered by the employer they are usually of no cost to the employee. They are also usually sponsored by the investment company/broker used by the employer and employee.

When planning financial retirement an individual is headed in the right direction by having a 401k individual retirement plan. But there is more to planning your retirement package. A person should start to plan his retirement at least a minimum of 10 years in advance. Since this is a relatively short period of time a person would need to find various aggressive ways to invest in his retirement. Make sure that if you are investing aggressively make sure your investments are within your risk tolerance, so that there are no major losses regarding your investing.

This article was brought to you by Cina Tucci on behalf of Tropical Financial Credit Union . Tropical Financial Credit Union offers free checking, the best current interest rates on used car loans, retirement planning and other financial services to members in Dade, Broward and Palm Beach County, Florida.


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