your 401(k) plan, you’re getting about a dollar and a quarter of money put aside, which becomes two dollars and fifty cents after employer matching. This is an amazing return on your investment, right out of the gate.

Think that’s all? Well, ther

As a responsible adult trying to save for your retirement, the single greatest tool in your arsenal is the 401(k) plan going through your employer.

In a previous article I explained the rule of 72, which is how compound interest works. In a nutshell, take 72 and divide it by the interest rate you’re getting in percentage points, and that’s how long it will take for your money to double. Thus, if you’re earning 6%, 72/6 = 12, and it takes 12 years for a dollar earning 6% to double.

With a 401(k) plan, up to a certain limit (usually 15% of your paycheck), for every dollar you put in, your employer matches with a dollar. That means that you’re getting a 12 year head start on compound interest doubling, assuming your investments get an annual rate of return of 6%.

However, just like those late night infomercials, “but wait, there’s more!” applies. Your money in the 401(k) plan is taken out pre-tax. This means that, at typical tax rates, for every dollar of spending money you give up into your 401(k) plan, you’re getting about a dollar and a quarter of money put aside, which becomes two dollars and fifty cents after employer matching. This is an amazing return on your investment, right out of the gate.

Think that’s all? Well, there

l, take 72 and divide it by the interest rate you’re getting in percentage points, and that’s how long it will take for your money to double. Thus, if you’re earning 6%, 72/6 = 12, and it takes 12 years for a dollar earning 6% to double.

With a 401(k) plan, up to a certain limit (usually 15% of your paycheck), for every dollar you put in, your employer matches with a dollar. That means that you’re getting a 12 year head start on compound interest doubling, assuming your investments get an annual rate of return of 6%.

However, just like those late night infomercials, “but wait, there’s more!” applies. Your money in the 401(k) plan is taken out pre-tax. This means that, at typical tax rates, for every dollar of spending money you give up into your 401(k) plan, you’re getting about a dollar and a quarter of money put aside, which becomes two dollars and fifty cents after employer matching. This is an amazing return on your investment, right out of the gate.

Think that’s all? Well, ther

(k) plan, up to a certain limit (usually 15% of your paycheck), for every dollar you put in, your employer matches with a dollar. That means that you’re getting a 12 year head start on compound interest doubling, assuming your investments get an annual rate of return of 6%.

However, just like those late night infomercials, “but wait, there’s more!” applies. Your money in the 401(k) plan is taken out pre-tax. This means that, at typical tax rates, for every dollar of spending money you give up into your 401(k) plan, you’re getting about a dollar and a quarter of money put aside, which becomes two dollars and fifty cents after employer matching. This is an amazing return on your investment, right out of the gate.

Think that’s all? Well, ther

te of return of 6%.

However, just like those late night infomercials, “but wait, there’s more!” applies. Your money in the 401(k) plan is taken out pre-tax. This means that, at typical tax rates, for every dollar of spending money you give up into your 401(k) plan, you’re getting about a dollar and a quarter of money put aside, which becomes two dollars and fifty cents after employer matching. This is an amazing return on your investment, right out of the gate.

Think that’s all? Well, ther

your 401(k) plan, you’re getting about a dollar and a quarter of money put aside, which becomes two dollars and fifty cents after employer matching. This is an amazing return on your investment, right out of the gate.

Think that’s all? Well, there’s even more – the interest your 401(k) account accrues is tax deferred. Comparing that to a normal investment account, what happens in the conventional account is that you have to report that interest as income in the year that it was earned, and pay the appropriate percentage. Let’s assume you’re paying a combined total of 25%.and earning 6%, which gives you a net, after tax, rate of return of 4.5%. By deferring your tax payment to the point where you actually withdraw from the account, your money will accumulate faster while you’re working and still making contributions.

Standard investment advice applies to 401(k) plans – start with a mix of stocks, bonds and related investments, weighted towards stocks and other long term yields when you’re young, shifting to more stabilized, fixed monthly income investments as you age.

There are drawbacks to a 401(k) plan; if you leave your current employer before 5 years, the money they contributed to matching funds reverts back to them. (This five y