How a 401(k) Plan Can Help You Accumulate Thousands of Dollars for Retirement

• Retirement Savings with a 401(k) Plan Remains the Most Common Tool in the U.S.
• Ensures Financial Stability and Reduces Tax Burden in Retirement
• Starting in 2025, Automatic Enrollment in Savings Plans Will Be Mandatory

Saving for retirement doesn’t have to be complicated.

The 401(k) plan, offered by U.S. employers, allows workers to accumulate money with tax benefits and grow it over the long term.

Although most employees save less than recommended, taking advantage of this account can mean the difference between a comfortable retirement and one full of limitations.

How a 401(k) Plan Works

A 401(k) is an employer-sponsored retirement account:

• Workers contribute a percentage of their salary directly to an investment account.
• The money grows tax-deferred while invested.
• Many employers match part of the contribution, which is essentially free extra money.

Starting in 2025, automatic enrollment will be required, with an initial contribution rate between 3% and 10%, increasing up to 15%.

There are two main types of 401(k):

• Traditional 401(k): Contributions are made before taxes; taxes are paid when the money is withdrawn.
• Roth 401(k): Contributions are made after taxes; qualified withdrawals are tax-free.

This structure makes the 401k retirement savings system one of the most effective tools to prepare for the future.

Retirement Savings Recommendations

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Fidelity’s guidelines suggest clear savings milestones:

• By age 40: three times annual salary.
• By age 50: six times annual salary.
• By age 60: eight times annual salary.
• By retirement age (67): at least ten times annual salary.

But the reality looks different:

• Ages 35–44: average savings of $45,000.
• Ages 45–54: $115,000.
• Ages 55–64: just $185,000—far from the ideal targets.

Retirement Savings in the Latino Community

For Hispanics, the challenge is greater.

Many work in jobs without access to retirement plans or are unaware of their benefits.

However, using a 401(k) can make a major difference:

• Contributions are automatic, making it easier to build 401k retirement savings.
• Employer matching is an opportunity that should not be overlooked.
• This system not only strengthens financial stability but also reduces reliance on public programs in old age.

What’s Next

With automatic enrollment starting in 2025, more Hispanics will be able to join 401(k) plans.

The key step will be staying informed and not opting out of the program.

Starting early, contributing consistently, and maximizing tax advantages are the pillars of building strong 401k retirement savings and ensuring a more secure retirement with fewer worries.