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Choosing a 401(k) Plan Over Individual Stocks


Published on 2025-03-21 17:21:10 - Investopedia
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    • A 401(k) plan allows individuals to save for retirement with tax advantages and employer matches they forego when saving solely through stock-picking.

The article from MSN Money discusses the advantages of choosing a 401(k) plan over investing in individual stocks. It highlights that a 401(k) offers tax benefits, as contributions reduce taxable income, and earnings grow tax-deferred until withdrawal. Additionally, many employers match contributions, effectively increasing the investment without additional cost to the employee. The piece explains that while individual stocks can offer high returns, they come with significant risk due to market volatility and the need for extensive research and management. In contrast, a 401(k) typically includes diversified investment options like mutual funds or target-date funds, which spread risk across various assets, reducing the impact of any single stock's poor performance. The article also touches on the convenience of automatic contributions, the potential for lower fees through institutional pricing, and the protection offered by federal regulations against mismanagement, making a 401(k) a more secure and less time-consuming option for retirement savings compared to managing a portfolio of individual stocks.

Read the Full Investopedia Article at:
[ [ https://www.msn.com/en-us/money/savingandinvesting/choosing-a-401k-plan-over-individual-stocks/ar-AA1BpEDE ] ]