A 401(k) plan, often referred to as a 401k, is an employer-sponsored retirement account. That means that it’s not one you can just go off an open on your own – it needs to be created by a business and offered to employees.
In 2019, the maximum contribution amount was raised to $19,000 per year – or $25,000 if you’re 50 years old or older.
401ks are one of the absolute best vehicles for investing since you’re adding pre-tax money. Adding money to a 401k – especially when you get a company match – is usually considered the best (commonly available) place you can put your money. If you have a company match, I’d recommend you do everything you can to contribute at least enough to get the company match.
What Should You Invest in Within Your 401k?
The simplest portfolio you can go with is a target-date retirement fund. These have names like “Vanguard Target Retirement 2045 Fund Investor Shares” which is what you might invest in if you want to retire sometime around the year 2045. If you’ve never invested before, these are usually a good first step.
For more information on how to invest within your 401k, check out Minafi’s free Minimal Investor course, which goes a number of things including how to evaluate the funds in your 401k, how fees work and which funds you should pick to maximize tax-efficiency.