Financial professional talks 401(K) and why you may want to skip the contribution

(CBS 58) – A 401(K) can be a great way to save for retirement, but Tony Drake from Drake and Associates says it doesn’t make sense for everyone.

Drake explained the ways to determine if it’s the right investment option:

• Consider the Long-Term Tax Implications
  • Understand the money you take out of a 401(k) counts as taxable income in retirement, and the amount of taxes you pay is based on your income
• Review Withdrawal Rules
  • If you withdraw from your 401(k) before age 59.5, that money will be taxed as regular income, and you will pay a 10% penalty
• Examine Your Investment Options
  • Investment options offered in 401(k) plans can be limited, and investing in individual stocks is not an option
• Research Fees
  • Almost everyone who has a 401(k) plan pays a fee, but 37% of people didn’t realize they were paying a fee

Drake also shared information on alternatives to a 401(K).