Time for a quick review of what you really need to know about your 401(k) plan (for those of you who skipped that stuff in the middle):
- It's a terrific method to put money away for your retirement in a way that lets you defer paying taxes on a portion of your income.
- Defer as much as you can, as early as you can -- especially if your employer matches even a portion of your contributions -- and you'll be way ahead of the game.
- Put your money into an equity index fund or target retirement fund.
- Be aware of the costs that the plan itself charges. Make sure that the costs of running the plan are not unnecessarily eating into your retirement savings.
- Leave your money in the index fund for a couple of decades, don't worry about it, and go out and enjoy life.
That's pretty much it. There isn't anything too much more complicated about 401(k) or other deferred compensation plans that you really have to know. The purpose of a 401(k) plan, ultimately, is to take some of the worries about retirement out of your life.
So use it!
We're so glad you shared your time with us to learn about 401(k) plans, and we hope you have the opportunity to use one, and to use one Foolishly. For more on preparing for the after-work life, be sure to take advantage of our 30-day free test-drive of our Rule Your Retirement service. It's just as good as an employer match, and the first month is on us.