How Many Bank Accounts Should I Have?

1. 401(k)

A 401(k) is an employer-sponsored investment plan that gives you, the employee, a tax break on any money you put in it to save for retirement. The beauty with a 401(k) is that the money is automatically deducted from your paycheck, so you don’t have to actively manage the process. The money is invested into funds that you choose ahead of time.

Some benefits of a 401(k) include the fact that some employers will match your contributions – which is a seriously sweet deal!

Additionally, contributing to your 401(k) will lower your taxable income meaning less money going to the IRS.

If you’re ever short on cash and are considering making a withdrawal from your 401(k), don’t bank on it. Withdrawing money in advance of your retirement age will result in a serious penalty plus income tax.

Additionally, if you leave your employer, you can take your 401(k) with you and roll it over into an IRA.

Not all employers offer a 401(k) and if you fall in the bucket, don’t despair! Equally good alternatives exist for you to stay on top of your retirement plans.