More and more employees are investing in their futures through 401(k) plans. Experts agree that most of us will need to accumulate 10 to 12 times our final years’ pay to have enough capital to provide income in retirement.
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What is a 401(k) plan?
A 401(k) is a type of retirement plan offered by an employer. Employees enroll in the 401(k) plan, and elect how much money they want to deduct, or defer, from their paycheck. At vRad, employees pick a percentage of their paycheck that they want to defer. The IRS sets a limit as to how much a person can defer on an annual basis. For 2012, the employee deferral limit is $17,000 a year. If you are 50 years of age or older, you can do an additional deferral of $5,500 a year as a catch-up contribution. The employer will withhold that deferral amount from the employee’s paycheck, and will send the money to the 401(k) account. As a participant in a 401(k) plan, you choose how you want your money invested by picking the funds available in plan.
Why participate in a 401(k) plan?
In a traditional 401(k) plan, your contributions are taken out of your paycheck on a pre-tax basis. This lowers your taxable income, and allows you to save, with less impact on your take-home pay. When you reach retirement age and start withdrawing money from the plan, your pre-tax savings and earnings will be taxed as ordinary income.
Most employers will match a percentage of your contributions. What does this mean – FREE MONEY!! At vRad, we offer a match after six months of employment. vRad matches 100% of the first 3% you contribute and 50% of the following 2% you contribute. To take advantage of the full match, a vRad employee needs to contribute 5% to the 401(k) plan, and vRad will match it at 4%. If you don’t participate in the plan, you are leaving money on the table.
Easy Way to Save
Since the money is taken directly out of your paycheck, it’s an easy way to save on a regular basis.
The 401(k) plan is a valuable part of you benefits package and offers an easy and convenient way to save and invest money for the future.
Why do you contribute to at 401(k) plan?