The One Small Step for You...A Giant Leap for Your Future Reaction



Robbing a bank may get you twenty. Do it right and let your money grow over time.



Free money? What a crazy idea. No one gives away money, right?

Wrong. Because when you make contributions to your companies 401(k) savings plan, you usually get matching contributions. It really is like getting free money.



What's that? You say you haven't enrolled in your companies 401(k)? Well, why miss out on getting your free money any longer? If you haven't already enrolled, consider joining your companies plan. Enrollment is simple! Or, if you already participate, consider increasing your contribution to 10 percent--the very least you should be contributing is your companies match, but you should really contribute more if you can.

Here's how matching contributions work. For every dollar you put in to your 401(k), a portion of your contribution will be matched by your employer. This can very with employers, but usually it can be anywhere from 2 to 6 percent of your contribution. I many cases, if you are not considered a highly compensated employee, you can contribute up to 15 percent of your pay to your 401(k).

Why contribute more than 6 percent?

If you contribute more than 6 percent to your companies 4019k), your company may not match those contributions, but there are reasons to contribute more than 6 percent.

• The more you contribute, the more you reduce your current year's income tax liability, since your contributions are made with pre-tax dollars.
• Generally, any earnings on your contributions also grow tax-free until you withdraw them. So, your tax savings compound year after year.
• You're going to need income after you retire. If you don't set aside money now, chances are you won't have the income you need and want at retirement. One way to start saving is to make contributions to your 401(k).

Growth and Choice

Your companies 401(k) will usually f=give at least five different investment choices for your money and the company match. Plus, since it's a "tax-qualified" plan, you generally don't pay income taxes on your savings and earnings  until you withdraw them. That lets your account build up more quickly.

In an emergency or to pay for your principal residence, college expenses, or unreimbursed medical expenses, you may be able to get your money through a hardship withdrawal. You should be keep in mind that, although there may not plan penalties for a hardship withdrawal, there may be both federal and state penalties.

You can also may be able to take out loans from your 401(k)--to buy your personal residence or for another purpose. I've been tempted many times to take out mine to buy a replica Batmobile, I'm standing pat. However, the interest you pay on your loan is not tax deductible.

For complete information on your companies 401(k) plan, including a description of restrictions on withdrawals, tax consequences, and potential tax penalties, see your employee handbook or check with your plan advisor.

About the author: John Sholtz is an avid toy collector and the interim editor of the Batcave Toy Room due to the abrupt death of Bruce Wayne. Learn more about him here and connect with him on Twitter at, Facebook, Google+ and LinkedIn.