RETIREMENT PLANNING » IRA & ROTH ACCOUNTS

American workers can choose to have a portion of their monthly income invested in a 401(k) account. This account, which is intended to serve as a retirement plan, accrues money that can then be used to buy stocks or other investment instruments, like bonds, or money markets funds.

Everyone needs to plan for their retirement. After all, what are you going to do when the paychecks stop coming in? You'll most likely get social security, and you might have a pension as well, but that's it and we all know how expensive life is. So building some sort of retirement nest egg is a smart thing to do. Many people choose to do it through their 401k plan. Every month a portion of your salary goes into it, and the money is then invested by the managers of the account (or even by you, if you choose to invest it yourself). The money in your 401k plan can be invested in stocks, bonds, money market accounts, or some combination of them. Many companies also offer their own stock as a 401k investment option.

The money you put into your 401k plan can't be touched until you retire (or at least, not touched without paying significant penalties and fees). You won't be able to access and spend any part of it, whether it's all tied up in stocks or money markets. Outside of your 401k plan, on your own, you can buy stocks whenever you feel like it, and then sell them when you think the time is right.

For more information concerning 401k plans and how they differ from stocks and other investment instruments, be sure to sit down with a financial adviser and go over all your questions in as much detail as you need. When it comes to your money, life, security and dreams, you can never have too much information.

Choosing between pretax and after-tax contributions to your 401(k) retirement fund is something participants need to decide very carefully. Why? Because it all comes down to "pay later" versus "pay now," and as we all know, that can be a very critical decision.

When it comes to planning for your retirement, you need to start as early as possible. No one wants to be retired and poor after all, what will you use to pay the bills when there are no more paychecks coming in? In order to plan for retirement, many people choose to put their money into a 401k retirement fund. They're one of the most popular investment vehicles around. When you contribute to your 401k, you can make either pretax or after-tax contributions. If you decide to make pretax contributions, you will be helping yourself in the short term because the money you take out of your gross income and put into your 401k will lower your income, and thus put you into a lower tax bracket. That's a good thing. The opposite is that when you go to withdraw money from your 401k when you're older, it will be taxed.

If you decide to make after-tax contributions to your 401k fund, meaning you pay your taxes now, as you normally do, and then put the money into your 401k fund, you will be taking a big chunk out of your disposable income right now. The good news is that when you go to withdraw the money from your 401k fund when you retire, it won't be taxed. All that money you put in will be yours, free and clear.

Managing your 401k retirement plan can be fairly complicated. To make sure you know what you're doing, sit down with a financial adviser or a representative of your company's human resources department and ask as many questions as you need in order to feel comfortable.

When American workers put a portion of their monthly salary into their 401k retirement plans, the money in that fund is then invested in stocks, bonds, money market funds, or some combination of the above . You can also choose to take your compensation in the form of your company's stock.

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