At Telco Credit Union, we know it can be difficult to save money, but we also know that saving money can benefit you greatly in the long run. Telco serves Greenville, Tarboro, Rocky Mount, and the Eastern North Carolina area. You can trust us with all your financial needs. Whether you want to open a checking or savings account, take out a loan, finance your mortgage, or become a Telco member/owner, we’ve got you covered.
You might be wondering what a 401(k) plan is, especially if you’ve been recently hired by a new company.
A 401(k) is a retirement savings and investing plan that employers offer. A 401(k) plan gives employees a tax break on money they contribute. Contributions are automatically withdrawn from employee paychecks and invested in funds of the employee’s choosing (from a list of available offerings). 401(k)s have an annual contribution limit of $19,500 for 2021 ($26,000 for those age 50 or older).
The catchy name comes from the section of the tax code — specifically subsection 401(k) — that established this type of plan. Employees contribute money to an individual account by signing up for automatic deductions from their paycheck. Depending on the type of plan you have, the tax break comes either when you contribute money or when you withdraw it in retirement.
So, how do you get a 401(k)? You get a 401(k) from your employer. Unfortunately, not all employers offer access to a 401(k) plan. Don’t despair if you fall into that camp. You can still reap the same tax benefits from the other big retirement savings vehicle, an individual retirement account.
All that may raise the inevitable question: What is an IRA? These accounts offer some attractive benefits (a broader selection of investments and generally lower fees), albeit with a few downsides (lower contribution limits and restrictions for high earners). Here’s how a 401(k) differs from an IRA and, if applicable, how to take advantage of both at the same time.
Regardless of your financial needs and interests, we’re here to help: contact us today! Telco Credit Union is here to help.