She Reports

5 Reasons Why You Need Your 401(k) Now More Than Ever

Saving during the stock crunch

-Jennifer Hamilton

So here I sit ... realizing that I have a nice chunk of my paycheck going into a 401(k), when there's so much I could be using that money for in my already-happening life. Yet, I don't do anything to move that money back into my directly receivable stash, instead leaving it where it is to stew in preparation for years down the road. Why do I do this again, especially while the stock market is as unstable as it is?

For several reasons:

1. I'm paying less in taxes now, and will pay less in taxes in the end. 401(k) plans are defined contribution plans, where employees (you) elect to place a percentage of your salary to contribute to the plan. This reduces your taxable earnings, and any earnings on the 401(k) are deferred until the money in the account is withdrawn at retirement. So, you pay less in taxes now, and your earnings on the 401(k) won't will only be taxed at the rate for your income later on down the road - which is likely to be lower than your current rate. read more about why you need your 401(k)...