The 401k is truly an amazing savings and investing plan. A 401k plan allows a worker to save for retirement, while deferring income taxes on the saved money and earnings until it is withdrawn. The 401k plan is always sponsored by an employer. 
If there ever was a "sure thing" investment, the 401k is it. The average 401k has up to 20 investment options available inside it. The 401k allows an employee to self-direct their retirement investment portfolio while having taxes deferred.
As if the initial benefits of a 401k plan isn't enough to entice you, this next fact certainly should. Many employers now offer 401k matching plans that are extremely attractive. There are some companies who will match an employees contribution to their 401k plan 100% up to 6% or so of their earnings. This means that if you made $60,000 a year and wanted to contribute $3,500 to your 401k plan you could do so and your employer would also contribute that same amount to your account. This is an investment that you simply cannot go wrong with. You are essentially earning 100% on your money right as you contribute the money. You simply cannot find an easier way to make money on an investment.
Current regulations limit the annual contribution on a 401k plan to $15,000 annually, so working toward that contribution should be a goal of yours. My rule is that anytime your employer offers a matching guarantee you should always contribute the maximum percentage that they will match. If you do this over the years, you will grow your funds and retire with a nice nest egg.
Good article, and true that first rule o retirement planning is to max out your 401k. Once you're done with that, you can look at other investment vehicles, such as IRAs. There's a lot more about 401k plans which you can write about, though. Rollovers, for example.
Posted by: Money-Rx | November 6, 2007 7:10 AM | Permalink to Comment