401 K retirement plans are tax-deferred savings accounts used to save for retirement. If you’ve never thought about retirement, they’re a great way to get started saving. Most employers offer them, and they might match your contributions. But, even if yours doesn’t, you can still open a self-directed one. That way, you can save for retirement without having to pay as much in taxes.
What Are 401 K Retirement Plans?
401 K Retirement Plan is a type of defined contribution plan. If your employer offers a match, they’re only able to match up to 25% of total compensation. Even if they match that much, they can’t go above $40,500.
For employees under age 50, there are some limitations to individual contributions. You can contribute up to 100% of your annual income, but no more than $20,500. Once you’re over the age of 50, the limit raises to $27,500.
If you own a business, there are ways to circumvent the limits, though. Some accounts let you make contributions as the employer and employee. So, you can put up to $60,000 a year into the account.
When using one of them, your investments are self-directed, too. So, you get to choose where your money will be invested. That’s a huge benefit to many investors, especially those interested in self-directed investments.
Assuming you’ve opened a 401(k) already, you can rollover the funds from it to another. That way, you can start directing the funds yourself.
