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Retirement Plans
The most common type of retirement plan is a 401(k), which
offers a tax-deferred means of saving for retirement. You're
allowed by law to invest a certain percentage of your income,
before taxes, with the provision that you cannot touch the
money until you retire (early withdrawals incur penalties,
fees, and taxes). When you withdraw the funds at retirement,
you will be taxed at that time.
Many employers offer a 401(k) matching plan, in which they
match a certain portion of your retirement contribution. For
instance, if you decide to put $50 per paycheck into your
401(k), your employer might match all or part of that amount.
This is, in essence, free money.
The money you deposit in your 401(k) is always yours. After
a certain time period called a "vesting period"
(a year or so, depending on the state), the money your employer
contributes also becomes yours, and it travels with you to
your next job. If you leave before you're vested, you forfeit
the employer's contribution.
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