It is generally beneficial to invest in the individual retirement program (401-K) offered by your employer which is usually a corporation or private employer, or partnership. If you or your spouse work for an educational employer or a State institution, usually you are eligible to invest in a 403-B Program. Government employees are usually eligible to invest in a 457-B Program. You will find that there are many different 401-K programs designed and set up for the various employers. The 403-B programs have several major financial companies that offer a variety of variable mutual fund options or a fixed a annuity option.

I was a stockbroker specializing in municipal bonds and the full spectrum of stocks for seven years. I was also a financial consultant marketing variable and fixed annuities to employees of school districts, colleges, and state institutions for five years.

EXAMPLE OF A 401-K PROGRAM
Let’s say an employer offers to match the employees contribution at a 50% rate up to 3% with a maximum contribution of 6% by the employee for matching purposes. That means if the employee chooses to contribute 6% the employer will contribute 3%. If the employee contributes 2% the employer will contribute 1% to the employee’s account. The employee usually deals with one investment company the employer has chosen. The investment company gives the employee a prospectus outlining the investment option available to the employee. Usually several mutual funds are available that the employee can choose from. The more common choices are a STOCK INDEX FUND, A BALANCED FUND(meaning the fund is invested in stocks and bonds), EUROPEAN STOCK FUND, CORPORATE BOND FUND, TECHNOLOGY FUND, INTERNATIONAL FUND, etc. The employee can choose from the fund choices , usually the choice is limited to three funds from those offered with the right for the employee to allocate their contribution. An example might be contribute one third to each of three funds. The age and point in the employees working life influence the best choices of funds for an employee. If the employee is close to retirement , THE BALANCED FUND, that is more conservative than the STOCK INDEX FUND, might be a better choice. If an employee is planning to work for ten or more years , THE STOCK INDEX FUND , might be the best choice for them. Statistically, over a period of ten years most STOCK INDEX FUNDS have a positive performance record that out performs fixed interest type investments. Also an employee can invest more than 6% in most cases if they want to but the investment over 6% would not be matched and also it is possible that the employee might have to pay income tax on the the contribution above the allowed amount depending on the tax laws at the time of the investment. Usually the money invested in a 401-K program up to the allowed limit is tax deferred meaning that the employee does not pay tax on the investment at the time it is invested, they are liable for income taxes when they withdraw amounts from the 401-K which usually is in retirement years when their income is normally less than their working years. Also also this tax deferred money is generating income in most cases which is also not taxed until withdrawn. If an employee needs to withdraw money earlier than age 55 , they may incur a 10% penalty in addition to the income taxes for early withdrawal.