401(k) Professional tips to help you save for your future – 2 of 20
401(k) plans were created a little more than 40 years ago, when Congress passed the Revenue Act of 1978. Included in the Act was a new section in the Internal Revenue Code – Section 401(k) – that allowed employees to avoid paying taxes on contributions to their retirement savings from salaries, bonuses, and other forms of compensation.
401(k) plans were intended to help Americans to save more money for retirement. But can they also help more Americans actually retire early? We believe they can.
In the U.S., 401(k) retirement plans were created to encourage employees to save more for retirement. In its wisdom, Congress structured the program back in 1978 to:
- Reduce your taxable income since contributions are made before taxes.
- Allow your money to grow tax-deferred so there is more money to compound.
- Encourage employers to match your contributions, which essentially gives you free money! But you only get that free money if you put yours in first. That can be the hard part.
Beyond starting your 401(k) as early as you can, nothing’s more important to its long-term success than how much you contribute. If you can’t make a large contribution, at least start with an amount to get the free matching and raise the amount every year in line with your pay raise if you can.
Remember, you can plan for your retirement at any age!
There are plenty of great resources to get you started and help you stay on track. Check out some of Shelton Capital’s resources at www.sheltoncap.com/.
