One of the best things about a 401K in Marysville CA is the tax deduction; when someone contributes, they get a tax break. Investing in a 401(k) lowers a person’s taxable income while helping them save for retirement. Below are several important things to know about 401(k) plans.
It’s Important to Consider Contribution Limits
Each year, the Internal Revenue Service evaluates the economy and assesses inflation. If the IRS believes that the cost of living is high enough, the maximum allowable 401(k) contribution increases. When someone maxes out his or her contributions for an entire career, they can end up living quite the comfortable retirement.
Play Catch-Up
If an investor is 50 or older, they can make an additional contribution of up to $6000 per year. This is a great way to increase the yearly tax deduction and kick saving efforts into high gear. The contribution limit applies to traditional and Roth 401(k) accounts.
Look for Employer Matching Programs
Another great benefit of a 401K in Marysville CA is that employers can match a worker’s contributions. Most companies match them up to a set amount. For instance, if a person makes $4000 per month and contributes five percent of their income, they’d contribute $200 per month and so would the employer. The employer’s contribution doesn’t count toward the limit, which makes matching programs great in multiple ways.
Solo 401(k) Accounts
It’s quite common for people to be self-employed, and these people often set up solo 401(k) accounts. However, contribution limits are cumulative, and the total limit is set across all accounts.
Tax Deductions
Here’s where workers should know the difference between different types of 401(k) plans. Roth plans don’t have tax deductions, and anything contributed to such an account is done with post-tax funds. Money grows in a tax-free environment and retirees can withdraw it without paying additional taxes.
Start Now
Even if a worker can’t make the maximum contribution to a 401(k), they should start saving for retirement as soon as possible. It all adds up, and contributing to a 401(k) is an easy way to start multiplying wealth for the future. Contact us for an independent review or visit the website for more details.
