Many people are not familiar with how a 401K works at their employer. I haven't been in a job that long which provided me one, but I have learned alot about them. There are a few main features of a 401K, so we'll start with one of them today.
The money that you contribute from your 401K is pre-tax money. For instance, if you contribute $100 to your 401K, and you are in the 25% tax bracket, you save $25 in taxes. This means that the $100 contribution you made, really only costs you $75. You do not pay the taxes until you begin withdrawing the money from your 401K. This is a big feature, that allows you to contribute more, and reduce your tax bill at the same time.
I hope that you will take this year to contribute to your 401K when you can. It is very important for us to prepare for our own retirement. Anything else (Social Security, etc) will just be an unexpected bonus when it comes time to retire!
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