Financial Answer Center
Understanding the Basics
- Introduction
- Your Role In Planning for Retirement
- Why You Should Invest in a 401(k) Plan
- A New Option to the 401(k)
- Choosing between a 401(k) and a Roth IRA
- Key Considerations
Why You Should Invest in a 401(k) Plan
A 401(k) plan is a great place to accumulate retirement funds. Here's an example: You earn $25,000 a year at age 25 and receive a 4% raise per year. If you put 6% of your salary into a 401(k) plan, you'll accumulate about $470,000 (before taxes) by age 65 assuming a 6% rate of return. By contrast, if you save at the same rate in a taxable account outside a 401(k) plan, you'll end up with about $350,000 (assuming a 25% tax rate).
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