Learn your investment options and get investment tips in this free lesson so you have a better understanding of how investing works.
You have several options to choose from as you plan for life after work. Many companies offer savings and retirement plans. The retirement income you receive from such a plan depends on how much you (and your employer) have contributed during your working years and the earnings on those contributions.
The amount you regularly contribute to one of these plans is usually taken out before you receive your paycheck, so it isn't taxed. Many companies also will make a matching contribution. For example, a company might contribute 50 cents for each dollar you contribute. The money is typically invested in preselected mutual funds. However, you can choose from among the funds, as well as what percentage of your contribution you want invested.
Money put into a mutual fund is pooled with the money of many other investors. By investing in a mutual fund, you buy units of that fund. The value of your units can rise or fall based on the type and performance of the mutual fund.
If you leave a company, you can roll over—or move—your eligible retirement funds left to another qualifying retirement account with a new company or into an Individual Retirement Account (IRA). You'll learn more about IRAs later in this lesson.