Introducing
Your new presentation assistant.
Refine, enhance, and tailor your content, source relevant images, and edit visuals quicker than ever before.
Trending searches
1
The Road Ahead: 401K Plans
What is a 401K plan?
Retirement Plan
Invested through the company you work for
Retirement Plan
% is taken from each paycheck
Named after the tax code 401K
It basically pays for your future self!
This 401k will become your pay check once you retire!
Investing Cap
There is a limit per year of how much you can contribute; approximately $18,000
Investing Cap
The limit gets based off of inflation or rising prices
Age 50 and over is allowed to contribute more; approximately $5,500
Why is a cap needed?
Stops people from investing more than they can afford; more money is needed earlier than later
Why is a cap needed?
Less money for businesses to have to match if a lot is contributed
Early Access
Unlike a savings account, this money cannot be touched before retirement
Early Access
If touched there is usually a penalty fee that averages around 10%
Example
401k currently contains = $550,000
Penalty fee = 10%
Example
$550,000 * 0.10 =
$55,000 penalty fee
Exceptions
Penalty may be lifted in the case of:
- Financial hardships
Exceptions
- Early retirement due to disability
- Reaching age 59 1/2
Why use a 401K?
Why?
More time invested =
more money saved
Why?
Can retire financially stable
Difficult to do on your own
Company Matching
Some companies will contribute money to your account as well
Company Matching
This may be a percentage based off of what you contribute or a set amount such as 50 cents on the dollar match
Example
- Your contribution = $3,200 a year
- Company match = 50%
Example
- $3,200 * 0.50 = $1,600
Company contribution = $1,600 a year
Company Matching
=
Free Money!!!
Tax Favored
Taxes deferred- money in the 401k is not taxed until you eventually take it out
Tax Favored
Lowers taxable income for the year
Quick Summary...
1. Financial stability
Quick Summary...
2. Company matching
3. Taxes deferred
What is a 401K continued...
Example
- Salary = $100,000 a year
- 401K Contribution = 3%
- Company Match = 100%
Example
$100,000 * 0.03 = $3,000 contribution
100% or 1.0 * $3,000 = $3,000 match
$3,000 contribution + $3,000 match =
$6,000 in your 401k
Example Continued...
- Salary = $80,000 a year
- 401K Contribution = 2%
- Company Match = 50%
Example Continued...
How much would be contributed to this employee's 401k this year?
Answer
$80,000 * 0.02 = $1,600 contribution
50% or 0.50 * $1,600 = $800 match
Answer
$1,600 contribution + $800 match =
$2,400 in your 401k
What if...???
If you began this 401k at age 22 and stayed at this job until you retired at age 65, with all factors remaining the same...
What would be the approximate amount in your 401k upon retirement?
Answer
43 years served at the company
$2,400 contributed a year
Answer
43 years * $2,400 =
$103,200 in your 401k
Lets Calculate!
Averages
Average age you will start working = 23
Average retirement age = 65
Averages
Average accountant starting salary = $55,000
Average 401k contribution = 7%
Average employer match = 50%
or 50 cents on each dollar
Bankrate.com
https://www.bankrate.com/calculators/retirement/401-k-retirement-calculator.aspx
Fact!
40% of workers eligible do not have a 401k plan - CBS News
Fact!
Why...???
Not given enough info.
and do not think ahead!