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When's A Good Time To Start Saving?
By Gina D.
Have you given much thought to saving for your retirement? You might say, I haven't given it much thought. I'm to young to even think about retirement. I'll worry about that when I get into my forties or fifties, or I have plenty of time. My friends, if you've ever used any of these excuses yourself, you've just made the biggest mistake of your life. Your never to young to start saving. But if you wait to long, you might be to old to accumulate a substantial nest egg. A few of my co workers who have been with the company for at least twenty years or more, are now in their late forties and early fifties. They are just beginning to worry about what their going to do to make ends meet when they retire. They don't have a savings account, nor did they enroll in their companies 401k retirement plan. At the rate things are going now, who knows if Social Security will still be around by the time they retire. So when is a good time to start saving you might ask? Is it to late? Friends, its never to late to start saving for your future. If your employer offers a 401K plan or other type of retirement plan, make it your business to enroll as soon as your eligible. The most popular is a 401K Plan. The Traditional 401(k) Plan allows eligible employees to contribute a portion of their salary to a retirement plan. Employers may choose to contribute either matching or non-elective amounts to the plan on behalf of eligible employees. Employer contributions are tax deductible and employee contributions are excluded from income for Federal Income Tax purposes. Who Is Eligible?
All eligible company employees must be allowed to participate in the 401(k). An eligible employee is any employee who is at least 21 years old, and has at least one year of service with the company. Who Is Excluded? Union employees and non-resident aliens who have no U.S source of income may generally be excluded from coverage.
In some cases an employer can establish less restrictive eligibility requirements, but not more restrictive ones. What is Vesting? Vesting is the participant's ownership in the value of his/her retirement account or benefit. The employer can choose from many available vesting schedules. The schedule selected applies to all employees. Are there any tax advantages? If so, who benefits? Actually, both the employer and employee can benefit. Let me explain how. Your Employer contributions are tax deductible, up to 25% of compensation of all participants. The Employee's elective deferrals are excluded from the employee's income for federal income tax purposes. Tax-deferred growth potential is possible. All investment earnings are tax-deferred until you start to withdraw the funds. Is there a penalty for early withdrawal? Generally, a 10% tax penalty is applicable to distributions for participants under age 59 1/2. Participants may have to pay Federal Income Tax on the distributions, as well. So do yourself a favor and visit your Banker. They'll be glad to help you start saving for your retirement. Believe me, you'll be glad you did. |
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