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Golden Gate Bridge - View from South Marin County

Having lived here once, I know San Francisco would be a great place to retire!!

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What is a Four Oh One Kay -(401-K)? Well, first you need to be working somewhere that has a "401-k Plan" in place. They are run by employers who want to give their employees a savings method to supplement their retirement. That's IT! It's a retirement plan funded by YOU. Sometimes, employers throw in some of their own money as a "match" to your contributions.

Dollar Signs It's also called a defined-contribution pension plan. Up until the 401-k was DISCOVERED, if an employer had a pension plan, it was usually known as a defined benefit plan. The employer put all the money in, invested it, and told the employee how much he/she would get paid in retirement. The benefits were "defined" by such things as years of service and average salary during the employee's career. There are still a lot of these plans in existence, but more and more employers are opting for the 401-k method.

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Why should I enroll in one of these plans? Ask yourself a few questions:

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The truth is, Social Security will be around for a long time. It will not be enough for most folks to retire in any kind of "style". As employers do away with the traditional pension plan, employees are now responsible for incubating their own retirement nest eggs into flocks of plump chickens!! The 401-k is one way.
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The Tax Code says that you may contribute money from your pay by withholding and not pay any federal tax (usually you get this same benefit at the state and local level - but, as they say, check your local listings) in the year you make the contribution. For 1998, the maximum is $10,000 and goes up each year via an indexing system. You might ask, when DO I pay taxes on this money? First, wait until you're at least 59 1/2 years old to avoid the 10% penalty surtax for early withdrawal. After that, all your withdrawals will generally be taxed at your tax bracket you have in retirement, hopefully, lower than when you were working.

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The "free" money we spoke of is the employer's so-called match. Let's say you make $40,000 a year, you put in 10% in your plan or $4,000. Your employer has a match equalling 50% of the first 6% you put in. In our example, that is $1,200. If nothing else changes, that is a 30% return on your money. It's free!! How can you not take it? The owner of the company where I work says, when people say, "I can't afford this", you can't afford NOT TO. If your employer has a plan, we say you should do ANYTHING AND EVERYTHING you can to get in on this. Even if you just start with 1%, it's a start. I mean, could you stop at Starbuck's one less time a week, if it meant you could BUY a Starbuck's when you retire??!!
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OK, now comes the "tricky", even maybe "scary" part. You're putting all this hard-earned money in the plan. You have to decide how to INVEST it!! It'll be all right. COME WITH US


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