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Profit Sharing?

JRV


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Can someone explain profit sharing to me? Is profit sharing something you contribute to like a 401k or is it just a bonus? Is it automatic or do you have to sign up usually?

And if you have any thoughts on 401k's please share them too. I'm 23 and don't want to start a 401k. Some people would say now is the best time to start but there are reasons I don't like 401k's. From what I understand, if I start a 401k I can't touch that money for like 40 years which would be when I retire. If I touch it early I would get a penalty. And that is assuming my money is still in the 401k 40 years from now. Social Security is looking 50/50 these days.

I would rather put my savings into things I can turn over every 5 or 10 years.
 
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You can probably get as good an answer regarding profit sharing by Googling it. Here's a link to a Wikipedia article on it:

http://en.wikipedia.org/wiki/Profit-sharing

You're actually wise to think about saving now. A 401K is designed to protect you on taxes, which is why there are so many penalties associated with them for early withdrawal. If you're interested, you should look for a retirement counselor. They can help you plan investments that will include a 401K, life insurance, short term savings, mid term savings, and other long term savings.

Frankly I'd go to a couple of them just so you can learn about some of your options. What should you be looking for at your age? What about if/when you marry? What about kids? What if you just want to make gobs of money up front for later investment? How long do you want to work? How much money do you want to have when you retire?

Consider your dreams and be realistic too. There are lots of factors that are out of your control, but you can plan around them if you know what to do. It's a bloody game imho, but you can do well if you know something about what you're doing.

I have a 403b at work, as my company is education oriented. I also have investments and protections outside of what I do with work. I can move money around if I want, though I'm not finance oriented so things stay pretty much in place.

Hope this helps!
 
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A 401(k) is a very good idea. You should also look into an IRA. It's never too early to start saving for retirement: the sooner you do, the less you have to put away in the long run.

Most businesses offer some kind of employee match to your plan. For example, my old employer matched 100% for up to 3% of my salary I put in and then matched 50% for the next 3%. So basically if I put 6% of my salary towards my 401(k) my employer matched 75%. That 75% is free money to me, and you should NEVER pass up free money like that.

Also, if it's all a little confusing to you, most banks have some kind of financial planner on staff you can speak with who can give you info and set you in the right direction.
 

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