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Earn More When You Graduate
When you start your first job out of college, retirement might seem very far away. But, if you start saving for retirement early, the money you invest will have lots of time to grow. Because of this, your first job out of college is a great time to start. Your employer will likely offer a 401(k) plan as part of your benefits package. A 401(k) plan is a great option to help remove some of the complications of investing.
What is a 401(k)?
A 401(k) plan is self-directed, qualified retirement plan established by an employer to provide future retirement benefits for employees. A 401(k) plan allows you to save for retirement and have the savings invested while deferring current income taxes on the saved money and earnings until it's withdrawn during retirement. Roth 401(k) contributions are made after-tax, but qualified withdrawals in retirement are free of federal income tax.*
Why participate in a 401(k)?
- You're Paying Yourself First. A 401(k) plan is a great way to save without having the temptation to spend the money you earn right away. Most plans are set up so a fixed percentage of your paycheck is automatically deducted and put in your 401(k) account every pay period. Even if your budget is tight, keep in mind that you can elect to contribute as much or as little as you feel comfortable, and you can adjust your contribution level as your salary increases over time. Plus, you probably won't miss the money if you start automatic deposits right away.
- Compound Interest. The power of compound interest is on your side. Compound interest works best over time, which is why starting early is key. With it, interest is calculated not only on the deposits you make but also on the accumulated interest from prior periods.
- Company Matching. The biggest benefit of a company 401(k) plan is the possibility of having a company match. Many companies give enrolled employees a match on their pay period contributions, typically a percentage of the employee's contributions up to a limit. This can be considered free money, which is something you shouldn't pass up, especially when it will compound over time.
- More Money for Retirement. Many experts say that retirees will need approximately 80% of their pre-retirement salaries to maintain their lifestyles in retirement. Starting early enables you to save more so you can have the flexibility to choose when to retire.
If you have questions about your investment options or your retirement account, contact UW Credit Union's Investment Services1 team. An experienced financial planner can help you decide which options will work best for you.
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* The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.
1 Investments are offered through Securities America, Inc., Member
FINRA/SIPC. Financial Planning and Advisory Services offered
through Securities America Advisors, Inc., an SEC Registered Investment Advisory Firm, Clint Walkner, Jeremy Marshall, Nate Condon, Jason Sherry, Representative(s). UW Credit Union and UW Credit Union
Investment Services are not affiliated with the Securities America companies.
Securities licensed in: AZ, CA, FL, IA, IL, MN and WI
Insurance licensed in: WI
Investment Advisory licensed in: WI
Not NCUA insured. No Credit Union Guarantee. May Lose Value.
