coins being dropped into a piggy bank representing 401(k) contributions as a way of planning for retirement

Our Dallas Financial Advisor On The Basics of 401(k)'s

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If you're just beginning your career, you may be wondering about a possible offering from your employer known as a 401(k).  It was likely a part of your salary negotiations and something your employer may have touted as a perk for deciding to join the company, especially if their contribution toward your Dallas 401(k) is generous. But if you’re new to retirement planning or have yet to establish a retirement savings plan or portfolio, you may not fully understand your 401(k), how it works, what it does, or how you can make it work for you and your goals upon retirement.

Our Dallas Financial Advisors Explain 401(k)’s

A 401(k) plan is an employer-sponsored retirement savings account in which funds are deducted from your paycheck each month and deposited into the account. These investments come with significant tax breaks either at the time of contribution or upon withdrawal. 401(k) plans are one of the most popular Dallas retirement planning and Fort Worth retirement planning options for a number of reasons:

  • Your employer could match your 401(k) contribution: many employers match your monthly 401(k) contributions, which is why our Dallas financial advisors recommend you invest enough of your monthly income to make this valuable perk worthwhile.
  • The money in your 401(k) account is immune to taxation: once your contributions are deposited into your 401(k) account, it cannot be taxed, even as this investment grows. 
  • Contributions lower your income taxes: Money that is deducted from your paycheck and invested into your 401(k) account is not a part of your taxable income and thereby lowers your income taxes.

Planning for Retirement with a 401(k)  Vs. Other Dallas Retirement Planning Options

If your employer doesn’t offer a traditional 401(k) plan, our Dallas financial retirement advisor insists upon exploring other ways to begin planning for retirement. One such way is with a Roth IRA, which is a personal retirement account that differs from a traditional 401(k) in that your contributions are taxed at the time of deposit, but not when you withdraw from the account. 

When you open a Roth IRA with our Dallas financial advisor, you’ll pay taxes on what’s deposited into that account based upon the rate in place at the time of investment, making it especially beneficial when the tax rate is low. With a 401(k) financial planning option, the investment is taxed at the rate in place at the time of withdrawal, which can be exponentially higher. It’s also important to note that since your Roth IRA contributions have already been taxed, you can withdraw from the account without penalty. When considering your Fort Worth financial planning and Dallas financial planning options, be aware that withdrawing from a Dallas 401K before retirement can result in stiff penalties and higher tax rates.  

Trust Our Dallas and Fort Worth Financial Advisors to Guide Your Retirement Planning

Whether your employer offers access to a 401(k) plan or you need to begin your own independent financial planning, we’re here to help you build your retirement investment portfolio. Our Dallas and Fort Worth retirement financial advisors are well-versed in the multitude of options available and will help you determine the investments most likely to secure your comfortable retirement. Schedule an appointment with our independent financial advisors today and see why so many trust us to guide their retirement planning.