Did you guys know that if you are a full time employee, you’re entitled to free money!? That’s right — Its called a 401k. 401k is a fancy term for a retirement plan that most employers provide to their employees.
WHAT IT IS
There are 2 types of Retirement 401k plans: Defined Benefit AND Defined Contribution.
In a DB plan, the employer promises to pay a defined amount to retirees who meet certain eligibility criteria. In other words, the plan defines the benefit to be received. In its most typical form, a DB plan pays a lifetime monthly benefit to retirees who fulfill specific age and service requirements. Benefits are usually linked to the amount of service and based on final average salary. Employees can reasonably rely on a known and expected benefit level; although protection against post-separation inflation is usually limited and/or uncertain. The plan sponsor may also provide an alternative lump-sum “cash-out” of the benefit entitlement. Until relatively recent times, the DB was the dominant form of employer-sponsored retirement program.
WHAT YOU SHOULD DO:
Contact your Human Resource Department.
Find out how much they are willing to match
Start contributing to your 401k up to the percent that your company matches
Check on your 401k every year.
By year 5 take the money out.
Lets say you were to earn 50,000/year and your company matches 6%. This means that every year a total of $2000 would be taken out total. Your employer would then ALSO add $2000 to your contribution, bringing your total to $4000.
But wait.. thats not all.. The average 401k plan see about 7-9% growth each year. So that means over the course of 5-7 years, you actually have about $40,000 when you only invested 10,000-12,000 dollars. At the end of 5 years, you can easily walk out with $30,000 (after a 10% penalty) and use that to start your own residual income.
If one were to do the math for a 10 year return on a promising 401k plan, the results would be even better. Having about $80,000 can do astronomical things for your lifestyle OR help you create the first of five arms needed to retire early.
For questions pertaining to the proper investing of your money into a 401k, please reach out to me at firstname.lastname@example.org or message me on Twitter,