Heya everyone.
The job I am currently with (just got hired) offers a 401k plan for their employees.
I am a part time worker (and college student), and will be getting about 20 hours a week, at $8.50 an hour to start.
I received a mailer today regarding the 401k plan my company offers. It is offered through the Teamsters and CitiStreet.
This is the first job I've had where I have been able to put money aside in a 401k plan, and I'd appreciate some information about it, as well as advice on whether I should take advantage of it or not.
Specifically, the CitiStreet 401k plan is called "The Plan" for those that might be familiar.
The portion of the brochure that stood out and might be especially relevant here is:
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Every pre-tax dollar you invest in the Plan reduces your current taxable income by a dollar. The more you contribute (up to the maximum the Plan allows), the lower your current tax bill.
Let's say you ear $12,000 a year and you decide to contribute $10 a week (4% of your pay) to the Plan. After 12 months, you've contributed $480. That $480 is deducted from your salary and Uncle Sam taxes you on $11,520 instead of $12,000, lowering your tax bill. Compared with saving the same amount in a regular taxable savings account, you actually end up with more take home pay.
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Lastly, here is a note regarding how much can be invested in the plan:
Quote:
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The ability to defer up to 25% of your eligible pay and 100% of your option week pay if applicable
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Can someone please explain this to me? I kind of "get it," but I don't understand it well enough.
Also, right now I am working part time. It seems like a nice company with a lot of opportunities for an employee to "branch out" into an area that interests them, and thus the option of making this a career is certainly a possibility.
However, what if I would work for this company for 5 years, putting a percentage aside every month, but then quit?
Would I be able to get my money I had invested back? If yes, what kind of penalties would I have to pay, and what other stipulations would likely exist? Also, if I am unable to get the money back, then is a 401k plan a risk worth taking for me at this point in my life?
Also, if you have any other comments, suggestions, or recommendations regarding a 401k plan and me I would greatly appreciate it.
It seems like a great idea, but any time money is involved I like to make sure I am making an informed and researched decision, so that it doesn't come back to bite me a few years down the road.
I'd really like to hear what you recommend I do, and also why. The why is important, because this is new to me, and I am reluctant to put random percentages of my money aside, unless I am sure it's a good idea, and understand how 401k plans work.
I was raised by parents that instructed the value of informed investing and putting money aside, not living paycheck to paycheck, and this seems to be one of those opportunities. I just want to make sure I make the right decision now, so that it doesn't turn around on me later.
Thanks!