Although stocks have tanked lately, your 401(k) is safe, says the Huffington Post contributor Ben Walsh. A short-term drop in the value of your account doesn’t automatically lose you money. To really lose money from your 401(k), your account has to fall in the long-term with the tax benefits considered.
Why? For the most part, a 401(k) is a tax-benefit strategy, sponsored by your employer and allowing you to invest part of your paycheck before taxes are taken out.
To demonstrate you the powerful effect of the tax benefits on your 401(k) funds, consider the following: Your marginal tax rate will be 25 percent, if you make between $37,000 and $89,000. This means that if you contribute $100 to your account, you’ll save $25. And even in a so-called market correction (when the market is down 10 percent or more), you’ll still have $90 remaining in your account, which is more than $75, what you’d be left with if you paid the tax on the $100.
Read the Ben Walsh’s full article for more info.
Tags: 401(k), stock market, stocks
