Navigating Retirement Funding Options

The old model for financial security in retirement was likened to a three-legged stool. Retirees would be stabilized by a combination of personal savings, employer-provided benefits and government aid. However, today, Social Security hangs in a political limbo and pension plans are incredibly rare to find. Now more than ever, retirement comes from personal savings, and time is of the essence. It is said that for every five years a person waits to begin saving for his or her retirement, the monthly investment must be doubled to catch the total up to pace with where it should be.
Stock Market-based pension schemes, including 401(k) plans, are among the best ways to go when saving for the future. Most employers offer access to these programs, and they may even offer incentives for enrolling. The most common benefits are explained below.
Matched Contributions
Many companies will match a portion of each employee's contributions to his or her retirement savings plan. However, matching rates vary greatly from workplace to workplace. Some employers, for instance, may match a certain percentage of your income dollar for dollar. Others may match a fraction of a percentage.
Tax-Deferred Earnings
Investments into a stock-based retirement savings plan are withdrawn before income taxes are taken from employee earnings. This means that he or she is responsible for a smaller tax burden and actually owes less money to the government while saving for the future. Of course, when a savings plan is closed, upon retirement, taxes apply to the whole sum. It is wise for a worker to keep all of the money within the account until he or she is eligible for retirement unless an emergent situation arises. Early withdraws incur extra taxes and can  ruin your future stability. It is possible to take an interest-free loan out on a stock-based savings plan, but should an employee leave the workplace for any reason, the entire loan amount must be repaid within one month's time.
Investment Options
While 401(k) plans are largely considered stock savings plan, there are a number of different ways that employees can allocate their earnings. Most employers offer investment opportunities including money market funds, mutual funds and the option to buy stock in the company. Each investment type comes with a different degree of risk and potential for reward. For instance, savings bonds are guaranteed not to depreciate in value, but they have small interest returns. Stocks are a much more volatile investment option. While the returns can be great, there is no guarantee that they will maintain the value which was paid to purchase them. However, if stocks do well, they can multiply an investment several times.
Most investors select a combination of all kinds of investments. This allows for some seriously large gains but does not put an entire retirement savings plan at the whim of the stock market. The specific elements that should be chosen differ from person to person. Factors including age, income level and what percentage of earnings he or she can afford to invest help determine which options are best for each worker.

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