In the United States, there are several options for having enough money for retirement. Americans have the possibility of applying for the 401(k) to combine it with Social Security. And this makes the money grow a little more each month. Any kind of help in having money for retirement is welcome.
However, it is also important to keep in mind that it is mandatory to know as many details as possible about these pension plans. Getting a good 401(k) pension plan is possible, but it is also very easy to ruin such a plan. This is because sometimes Americans don’t wait long enough before they start using this money.
And what seems like a good solution to a lack of money before retirement can turn into a very big loss. Applying for the 401(k) early will cause us to lose a large part of this pension plan. And this affects each and every American who chooses to make use of the 401(k), regardless of the amount they have saved.
WHY CAN I LOSE MONEY WITH THE 401(k) RETIREMENT PLAN?
In truth, the reason for this loss is quite simple. As the name itself suggests, the 401(k) retirement plan is a retirement plan. This means that citizens must make use of it when they are of retirement age.
And this retirement age is 59 and 1/2 for the case of the 401(k) plan. Therefore, if we think about withdrawing money before that age, we will pay an extra 10% tax. This doesn’t sound like a huge amount, but it can set us back $100 out of every $1,000. So, it is actually a lot of money if we have the retirement plan well advanced.
DO I HAVE TO PAY TAXES ON MY RETIREMENT?
The 401(k) retirement plan obligates you to pay taxes only in the case of requesting the money before the established age. This is a kind of penalty for getting the money early.
When we pass the minimum age to obtain the 401(k) we will not have any problems when it comes to paying taxes. We’re not going to have to pay a dollar in taxes as a general rule. This is because when we are building the retirement plan we are already paying taxes every month.
For that reason we will not have to pay extra taxes when we start receiving this money. Also, remember that this pension plan is compatible with the Social Security check. So we have access to both payments as long as we have created the pension plan in advance.