Saving for retirement is extremely important and it is just as important to understand all the offerings out there for saving your money. Beyond IRAs and Roth IRAs there are plans outlined at 401k.com, which are only accessible through an employer.
The 401k plan is much younger and much more interesting in its birth than you might expect. In 1980, Ted Benna, a benefits consultant for The Johnson Cos., arrived at his own interpretation of retirement plan law and designed a new plan for his company that would allow employees to use pre-tax dollars for retirement savings and ask the company to add in matching funds. It was a revolution in employee benefits. Reading about the ins and outs at 401k.com can help you understand how the plan works.
Benna even convinced the Internal Revenue Service to change rules regarding retirement plans in order to make his creation work. Soon enough it was adopted at many companies throughout the 1980s and morphed into one of the most popular ways to save for retirement.
How can you take advantage of your company’s 401k? The first thing you need to do is to make sure that you are taking advantage of the match right away. The match is essentially free money. That is the best way to get good at saving is to identify the way that you can take advantage of the benefits coming from your employer. When your employer matches 401k funds, you get to fill out your account with money that never touches your paycheck and never increases your tax bill. It is a win-win.
Once you maximize the money you are putting into your 401k, you want to be able to make as much money on the side as possible. It is by learning skills and making sure those are marketable skills that you can increase your earnings and really make a difference in your financial life.
Spending less that you earn is an old personal finance maxim that really can be a good way to start you on the path to financial independence. The simplicity of that statement is helpful for narrowing your priorities. Although it can get dicey in practice, to think of that on a monthly basis is a great way to learn how to get good at money. Money is tool that tends to intimidate people that have always been anxious about it. Having enough of it is great for happiness. Learning how to manage it effectively is even better.
Managing money is also about managing your desires. You do not want to be caught up in a web of constantly looking fulfill material desires and consuming everything in sight. That is bad for the bottom line. And it is bad for your eventual retirement. You need a base of capital from which to operate. Whale being a person is not like running a business, taking some of those principles is not a bad way to bring your financial life into focus.
Researching your way through financial abilities on 401k.com and other sites can be a liberating experience. Just remember to walk before you run and eliminate your debt as much as possible.