Can’t decide whether or not the 401K plan is right for you? Or, perhaps you do contribute to your 401K, but not to the maximum?

Either way, what I am about to teach you is something that will completely change any thoughts you may have about contributing to the 401K plan. It doesn’t matter how much you have read or know about the 401K, chances are you have never thought of this one key benefit! I know that I certainly didn’t!

You probably already know that the 401K is a great way to lower your taxes. But have you ever considered how that effects how much you should contribute?

Here is the one key thing about the 401K that completely changed my thoughts about it…

Let’s say that you are paying 35% on your taxes. You make $50,000 a year and this year you decide to put $5,000 of it into your 401K. You may be thinking, “Gee, $5000 is a lot of money that I’m dumping into this stupid plan!” And I completely understand your thinking. But here’s the thing…

You’re not really putting $5,000 into your 401K! At least, when you factor everything else in, it doesn’t seem like you are contributing that much. Why is that?

It all goes back to taxes. Because your 401K works as a tax deductible, if you decide not to contribute the $5,000, you are going to lose that money to taxes anyways! Let me ask you this, would you rather put money in your 401K or to the government? I’m selfish, I know I would rather it go to my 401K. And I’m sure you are the same way.

The question now is, how much does that $5,000 really cost you? Believe it or not, it only seems like it costs $3,250!

The extra $1,750 was going to go to the government anyways! So it might as well be put into your 401K if you ask me.

Most people make the mistake of thinking that if they contribute $5,000, that’s $5,000 less they will be able to spend each year. It isn’t. It’s $5,000 less you will have to pay as taxable income when tax season arrives. So if you are making $50,000 a year, with that $5,000 contribution to your 401K you are only going to have to pay taxes on $45,000.

This key difference is what makes the 401K plan so special!

The Importance Of All Of This

If you didn’t quite understand all of the math above, just know that when you are putting money into a 401K, it ends up costing you much less then what it seems like at first!

This is really important because so many people hate the thought of putting away money that they won’t see for years or even decades later! When you consider that the money you are putting in is much less than what it seems like. this will help ease your pain.

This key is also very important when it comes time to decide on either a 401K or a Roth IRA. I will admit, I have been a fan of the Roth IRA for a long time now. However, after I learned what I have just told you so far, I believe that this often gives the 401K a slight edge over the Roth IRA.

The fact is, you can’t go wrong with either the Roth IRA or the 401K. They are both great retirement plans. Most of the time, there is very little difference in how much money you will actually receive in the long run. Don’t get too tied down about which one to choose. After all, is it really a big deal if you retire with 1.8 million or 1.7 million? It’s not something you should lose sleep over. Just put as much money as you can in either one, or both of these great plans!

If you work for a company that will match the contribution to your 401K, by all means start there. I wouldn’t turn down free money for anything! But after that, the decision is totally up to you on whether to put it in a 401K or a Roth IRA. If you really want to know which one is better for your current situation,visit a financial advisor in your area to help you decide.

The one thing I want you to learn from all of this is this…

Don’t feel bad in any way contributing to your retirement plan! It pays off and it pays big in the long run! Get started today without any regrets to put money away for retirement. The money that you are thinking about contributing is going to go to one of two places. You or the government.

So make the wise choice. Make sure that million dollars goes to you and not the president when you retire!

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