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October 24, 2011

About 70% of 401(k) participants are passing up free money.

Many employers match an  employees’ contribution to their 401(k) plans.  The most common match is $1 match for every $1 that the employee contributes up to 3%.   Most employees are not contributing enough to capture the full match that is available.  The employee’s contribution is pre-tax.  That is, the money contributed is not taxed.  The contributions, employer match and any income and/or gains will be deferred.  They will be taxed when the funds are withdrawn in the future.
If the employer  offers a Roth 401(k), the employees’ contribution is made with money after it is taxed.  The contributions, the employer match and income and/or gains is not taxed when it is withdrawn by the employee. 
FINRA recently issued an alert encouraging employees to take the free money.  READ MORE

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