401k planning can maximize savings and secure financial freedom in retirement. Learn to set 401k goals, decide what you want your money to do, how much to contribute, how to choose a wise investment, monitor your plan during job changes and more.

401k Basics

A 401k plan offers you the luxury of tax-deferred saving. This means you don't pay income tax on this money until you withdraw it from the plan. An added bonus is your taxable income decreases and your take home pay increases.

If your employer offers a matching contribution, your retirement savings can grow much faster. In order to maximize an employer match, consider spreading your contributions throughout the year so you receive a match every month.

Automatic payroll deductions make saving even easier with 401k plans. The money is deducted before you get your paycheck. This creates a strong savings environment since you do not have the opportunity to spend the money first.

Most 401k plans are handled by professional mutual fund investors. Your 401k investment will most likely have a portfolio manager, along with a team of dedicated analysts who are trained to research and analyze companies, securities, and other investment opportunities on your behalf. You are afforded the luxury to simply sit back and watch your investment.

You can also take out a loan against your 401k investment. In this case, you are actually borrowing the money from yourself. Like any other loan, you have to pay back the amount borrowed, plus interest. Unlike a retirement withdrawal, you won't be subject to withholding taxes or penalties as long as you repay your loan on time.

Withdrawals are a different subject. If you withdraw money from your 401k account, you can't put it back. A hardship withdrawal is the most common type for 401k participants. To qualify for this type of withdrawal, you must need the funds for:

Medical Expense incurred by the participant, the participant's spouse, or any dependents of the participant.

Purchase of a Home for participant's primary residence.

Educational Costs for the participant, the participants spouse, or any dependents thereof including tuition & room & board.

Prevent Eviction or foreclosure on the mortgage of a participant's principal residence.

Whether you are considering a new 401(k) plan or considering a change in providers, it's always wise to check with your tax advisor before participating in any type of financial investment.