Updated: Apr 3, 2021
Short answer: if it's free- YES
If there's costs... there might be a few other things to consider.
But first, what is a 401k?
401k's are employer sponsored retirement plans. There are two basic types of 401ks- traditional and Roth (just like IRA's)
It's easy to set up a fixed percentage to be withdrawn from your paychecks and contributed directly to your 401k
Employers can usually match up to a certain percentage which means FREE MONEY. Always always always try to max out your employers match so you don't miss out on free money.
For example, say you make $100,000 a year and your employer offers a 401k matching of 50% up to the first 6% you elect to contribute. If you contribute 6% of your annual earnings ($6,000), your employer would contribute an additional 50% of that amount. So, 3,000 free dollars.
401k contributions are not usually counted as income which can put you in a lower tax bracket.
Your savings grow tax deferred. Typically in investment accounts your gains and dividends are taxed. Your earnings will continue to earn as long as the money stays in the plan.
Your 401k is protected from ERISA (EMPLOYMENT RETIREMENT INCOME SECURITY ACT)- creditors can't take your 401k money if you fall behind on your finances.
•Start contributing early
•Maximize employer matching contribution
•Diversify your 401k portfolio
•Don't withdraw early unless you absolutely have to
•Do your research before investing into anything!!
Post by Nayab Abbasi