Is Your 401(k) Enough for Retirement?
Investing in your employer-sponsored retirement plan is one of the smartest things you can do to build a sustainable financial base. These plans provide an easy way to contribute and invest money that's earmarked for retirement. But are they enough on their own to cover your costs in retirement? Let's go through the pros and cons of using only a 401(k) to fund your golden years.
A 401(k) is a great starter vehicle when it comes to saving for retirement. First, they're widely available at most employers and generally convenient to access. Second, many employers offer an "employer match", which serves as a 100% return on any money you put into the plan. Last -- but most definitely not least -- you'll receive a tax deduction and immediately reduce your tax bill in the current year.
Money that's contributed to a 401(k) is considered tax-deferred: funds have the chance to compound freely for years until withdrawal. For most, this means in retirement, but in certain cases -- like in the event of a true emergency or other infrequent life event -- you can access the money earlier. This also depends on the specific rules of your employer's plan.
Source Fool.com
