Retirement and Holes in the Social Security Net, Part 1: The 401(k)
Retirement and Holes in the Social Security Net
Part 1: The 401(k)
Americans are now living in a time where they cannot depend on Social Security being there for them when they reach retirement age. Entitlement programs such as Social Security Insurance are part of the reason the United States currently finds itself fiscally insolvent, and as such SSI as we currently know it may be coming towards an end. It is time Americans began thinking of retirement by independent means, without the safety net of SSI; if they do not, Americans could find themselves having to work well into their elder years, or not be able to retire at all.
There are many methods Americans can use to prepare for retirement besides depending on the government; so there is little reason why, without a small amount of know-how and planning, retirement should be a dream. 401(k)s, IRAs, and annuities are just the tip of the proverbial independent retirement planning iceberg. These are three very different strategies to help individuals save for a comfortable retirement, but with a modest amount of knowledge and guidance, each person can be the master of their own retirement.
*Individual retirement planning can be daunting, and this series aims only to give the bare bones of these three investment vehicles. For in-depth issues or questions, please seek the advice of an experienced and qualified financial planner.*
A 401(k) is probably the term most people interested in retirement planning are familiar with because there are a lot of companies that offer this plan as part of their employee benefit package. Named after the IRS laws that allow this structure, 401K plans are available to employees through their employers. The employer takes the money out of the employee's paycheck every payday and deposits into the employee's 401K account. The account typically is made up of investment vehicles like money market funds, growth funds, and even index-based stock exchange funds, which increase in value over time. Right now, the maximum amount an employee can contribute before taxes every year is somewhere in the neighborhood of $16,000.
The 401(k) option works well, obviously, for individuals who are employed by a company that offers the plan; which, of course, is not everyone. What about self-employed individuals, or those who work for companies that do not offer 401(k) plans? Don't worry, there's something for everyone in the realm of independent retirement savings, and we will tackle those left out in the 401(k)-cold. Check back for the second piece in this series: individual retirement accounts.
Part 1: The 401(k)
Americans are now living in a time where they cannot depend on Social Security being there for them when they reach retirement age. Entitlement programs such as Social Security Insurance are part of the reason the United States currently finds itself fiscally insolvent, and as such SSI as we currently know it may be coming towards an end. It is time Americans began thinking of retirement by independent means, without the safety net of SSI; if they do not, Americans could find themselves having to work well into their elder years, or not be able to retire at all.
There are many methods Americans can use to prepare for retirement besides depending on the government; so there is little reason why, without a small amount of know-how and planning, retirement should be a dream. 401(k)s, IRAs, and annuities are just the tip of the proverbial independent retirement planning iceberg. These are three very different strategies to help individuals save for a comfortable retirement, but with a modest amount of knowledge and guidance, each person can be the master of their own retirement.
*Individual retirement planning can be daunting, and this series aims only to give the bare bones of these three investment vehicles. For in-depth issues or questions, please seek the advice of an experienced and qualified financial planner.*
A 401(k) is probably the term most people interested in retirement planning are familiar with because there are a lot of companies that offer this plan as part of their employee benefit package. Named after the IRS laws that allow this structure, 401K plans are available to employees through their employers. The employer takes the money out of the employee's paycheck every payday and deposits into the employee's 401K account. The account typically is made up of investment vehicles like money market funds, growth funds, and even index-based stock exchange funds, which increase in value over time. Right now, the maximum amount an employee can contribute before taxes every year is somewhere in the neighborhood of $16,000.
The 401(k) option works well, obviously, for individuals who are employed by a company that offers the plan; which, of course, is not everyone. What about self-employed individuals, or those who work for companies that do not offer 401(k) plans? Don't worry, there's something for everyone in the realm of independent retirement savings, and we will tackle those left out in the 401(k)-cold. Check back for the second piece in this series: individual retirement accounts.
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