Probably, when everybody does beat the bush today, we're going to look at how much to contribute to your 401k plan if you happen to have one from your employer. The number one thing to remember when you're contributing to a 401k plan is that the retirement fund is for retirement. Once it gets locked in there, you're not going to have access to it unless you pay a penalty. The whole premise with the 401k is that it's not taxed now and it's going to be taxed later. Hopefully, when you're retired, you have a lower income so that it will be taxed at a lower tax bracket. That money that comes out of your paycheck that is untaxed is eventually going to be taxed. There is a slight advantage here because even if you're going to be in the same tax bracket when you retire, it's good to have a 401k plan because the portion that is not taxed right now has time to grow. This is significant- it can be like anywhere between fifteen to thirty-five percent extra money on top of whatever you're contributing, and this will be allowed to grow in the future. If you have an emergency and you need to raid your 401k plan, it just means that you didn't hold enough cash to weather all the emergencies. Therefore, you contributed to your 401k a little bit too much. When you need to raid it, which is not recommended, and you take it out before fifty-nine and a half, you're going to have to still pay income tax on it and on top of that, you have to pay another ten percent. Let's say you're at a 25% tax bracket and you want to take out ten thousand dollars. Twenty-five percent is two thousand five...
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Video instructions and help with filling out and completing How Form 8865 Contribution
