December 28, 2016

THE KEY IS NOT TO ALLOW ANY CHOICE IN THE MATTER:

This long-term investment leads to a guaranteed 100% return on Day 1 (Philip van Doorn, Dec 28, 2016, MarketWatch)

In May 2015, Financial Engines released the results of a study that concluded workers in the U.S. were leaving $24 billion a year on the table because they don't contribute enough to take full advantage of employers' matching 401(k) retirement-plan contributions.

A 401(k) is a tax-deferred retirement plan that allows you to contribute a portion of your salary before taxes. The money is then invested according to your selections and remains tax deferred. The price is that you cannot withdraw any of the money until the year you turn 59 and a half, without paying a penalty. Then, when you are retired and begin withdrawing the money, it will be taxable income, presumably at a lower rate.

But what can be even more significant is that many employers offer matching contributions, up to a certain percentage of your salary.

Let's say your annual salary is $75,000. Your employer offers, for example, a match of up to 5%. (In my own experience, the lowest employer match I was ever offered was 3%, and the highest was 8%.)

In this example, if you were to contribute 5% of your salary, or $3,750 a year, to your 401(k) account, your employer would also contribute $3,750 a year. Contributions are typically made every pay period. The bottom line is: Each of your contributions would earn an immediate 100% return -- a doubling of your initial investment.

Posted by at December 28, 2016 8:17 AM

  

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