“No complaint… is more common than that of a scarcity of money’, said Adam Smith
(2015).” As one ages, one must always look for a way to save for the future, especially
before retirement comes around them. One way to attempt to secure your future is through
the 401(k) plan. A crucial time to learn about organizing a 401(k) begins as a college
student, before setting foot in a career and entering a new world of financial
responsibilities. According to irs.gov, “a 401(k) plan is a defined contribution plan where
an employee can make contributions from his or her paycheck either before or after-tax,
depending on the options offered in the plan” (IRS, 2014). Creating a 401(k) account is an
imperative way to begin saving as soon as you are given the chance by the employee. It is
an opportunity to take advantage of employer contributions, be eligible for tax breaks and
most importantly, to accumulate wealth. As money is collected in the account, one will
notice, in the short term, the gains will appear small although in the long term, one will
notice the earnings will grow rapidly. However, one should be wary of the financial
blunders that may occur when it comes to deciding how to invest one’s money, as one
could easily forfeit their account as well.
Having knowledge about 401(k) plans is highly beneficial to college students as they
transition from school to a career and begin planning for their retirement. The 401(k) plan
is the most common defined-contribution plan, so many students will probably have this
type of plan in their employment, so understanding how it works is crucial. This is mainly
because there are many stipulations and “fine-print” terms and conditions. Some of these
conditions include early withdrawal penalties, tax penalties, or even loss of the employer
“matched” amount of contribution, all things that will leave an individual with less money
for their retirement (Brandon, 2014). It is always better to go into a situation having some
knowledge of how things work, and retirement planning is no exception, even if it is years
in the future. In fact, as of today “one-third of people age 55 to 64 have not saved a penny
for retirement” and “90% of American workers will not be able to afford to retire on
savings and Social Security” (Garman & Forgue, 2014, p. 522). This means that because
people did not think ahead and save enough money to cover the cost of living, once they
