Should I Invest In 401-K?

Most of us throw all the cautions to the air and deal with our life as it comes. We forget to think about our future and most importantly about our retirement plans. Quite contrary to it, there are some people who take their retirement plans a little too seriously and try out every measure to secure their future. Regardless of the group they belong to, there is always a time when they think or consider about investing in 401-K.

401-K is a retirement plan that allows employees of various companies to save for future. This plan offered by the employers allows the workers to invest a cut out of their paycheck prior to a tax deduction. The plan sounds reasonable, an excellent opportunity even, yet it didn’t end up being a favorite of many people. This raised question among many people whether they should invest in 401K or not? We cannot make a decision for you, but we can, however, guide you to make the right one. Let us show you both sides of the coin and leave it to you to decide for yourself.

Why shouldn’t you invest?

  • The retirement plan takes out 30% – 50% of the paycheck leaving the employees to spend a good part of their life in the miserable money-less state.
  • The 401-K retirement plan takes such a large portion out of your pay that you are left with nothing but just enough to make ends meet which deprives you of an emergency fund.
  • Unlike other plans, this retirement plan is risky, it rises and falls with the stock market and the employee has no control of it.
  • 401-K investment discourages huge savings. It is impossible to save a large amount for a financial goal when most of your paycheck is going to the 401-K and the rest is used for paying for essentials.
  • Once you reach your retirement age and get the 401-K savings, you get tax deducted from it. Also, you cannot invest it due to certain restrictions.
  • The compounding return is so high that once you do get your share you only get 60% of the amount you paid your entire life.
  • The money is safe and sound for the next 30 years but if you got a medical condition or need the money for utmost emergency, you cannot use it without penalty; which basically defeats the purpose.

Why you should invest?

  • This is a good investment plan if you have more than one source of income and can easily spend your life in comfort even if 30-50% of your pay is going towards the investment.
  • The tax advantages of the plan is considerably good and despite all the deductions it still piles up to something good.

401-K basically asks the employees to choose between now and later, so it’s a trade-off between present and future. If you want to have a save future then 401-K is your thing, but for that, the employee will have to live a miserable adult life. And to be honest, there are far better options for employees to choose from.