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A 401(k) plan is an employer-sponsored salary deferral retirement plans offer strong tax incentives to save for retirement.

These retirement plans allow workers to save and invest for retirement by setting aside some of their salaries for that purpose. By participating in a plan, you can receive tax benefits while giving your money the opportunity to grow.

Most salary deferral plans also give you a degree of control over your money. You determine how much you would like to invest in each of the planís investment options.

Payroll deductions

If you contribute to an employer-sponsored salary deferral plan, money will be transferred directly from your paycheck to your selected investment options. Itís easier to save when the investing is done for you automatically.

In 2012, you can contribute up to $17,000, or, if youíre 50 you may make an additional $5,500 contribution to a 401(k) plan.

Tax benefits

Take advantage of tax benefits when you save for your retirement through salary deferral plans.  Traditional pretax contributions to retirement plans provide tax-deferred benefits.

First, you wonít have to pay income taxes on your contributions at the time you contribute. Getting a tax break on your contributions can help you save more.

Second, you wonít have to pay taxes on your earnings until withdrawn. So the taxes that you would have paid on earnings stay in your account.

Investments

There are many investments options available in the plan that range from very conservative to very aggressive.  Contributions can be spread out in any allocation a participant may choose and can be changed at any time.  





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