There are many advantages to using your 401k or IRA for future savings. These retirement tools are truly without compare in many respects. But if I had to pick out one attribute that shines above the rest, especially when compared to other ways to save, it’s the tax advantages.
This is well illustrated with a powerful example from an American College textbook I was recently reading through.
A wise person was once asked: What’s your single most valuable asset? His response was not his home, his business, or his 401(k). It was his future cash flows. Future cash flows--and specifically increasing ones--can dwarf other assets in comparison.
Do you look at Social Security the same way? Your future Social Security benefit is a series of future cash flows. How much those cash flows will be is unclear. It’s largely up to you, how much you earn, and how you utilize the Social Security system.
One of the top priorities of many young families I talk with is to save for their children’s college. College costs are rising quickly, and parents are seeing an opportunity to help the next generation along the way.
Fortunately, the U.S. Government sees it the same way. A section of the IRS tax code--Section 529--created a special savings account, administered by the states, to help families pay for college expenses.
Here’s some information on how 529 plans work, their advantages, and three pointers to get started using one.
I love 401(k) plans! Sure they’re not perfect, but few tools are better equipped to help families build wealth for a comfortable retirement.
But there are some common 401(k) pitfalls that can really get folks in trouble. In many cases, these 401(k) mistakes can end up costing investors tens or hundreds of thousands of dollars over a career of diligent saving!
Here are 4 common 401(k) dangers, and how to avoid them.