Build retirement wealth with your 401(k)

The Carpenters Retirement Plan can be a significant source of retirement income for eligible participants. However, don't overlook the great potential of the 401(k) subaccount inside the Carpenters Individual Account Pension Plan. The tax advantages and investment returns can make it a very powerful engine for building retirement wealth.

Lower your income taxes
The 401(k) subaccount is funded with money deducted from a participant's wages, along with investment earnings from the plan. Your 401(k) contribution comes out of your paycheck before federal income taxes are calculated. By doing so, you can actually lower your federal income tax liability.

For example, if your hourly wage is $40 and you put $5 per hour to your 401(k), your federal income tax withholding will be based on an hourly wage of only $35. Working 40 hours per week and 2,000 hours annually, your annual contribution would amount to $10,000 while your federal income tax liability would be based on an income of $70,000 instead of $80,000.

Saving a percentage of wages in your 401(k) will lower your take-home pay, but not as much you might think. Paying less federal income tax each pay period can partially offset your elective contribution.

Tax deferred growth
The money saved in your 401(k) grows on a tax-deferred basis. That means you postpone paying the federal income tax until you take the money out of the account. When you are retired and withdrawing money, you'll only pay income tax on the portion withdrawn from account, not the whole account balance. Financial advisors discourage taking out all of the money in a lump-sum distribution, because all of it will be taxed as income and you'll end up writing a very large check to the Internal Revenue Service. Besides, the more you keep in your 401(k), the more you can earn from positive investment results.

Higher contribution limits
Starting Jan. 1, 2018, participants can contribute up to $9 of their hourly wage to their 401(k) accounts. That's one dollar more than the previous limit of $8 per hour. Participants age 50 and older are allowed to contribute an additional $1 to $3 per hour, making their maximum contribution $12 per hour. Take advantage of these higher contribution limits now to build a more financially secure retirement.

Time is money
Keep this in mind as you're deciding how much to contribute to your 401(k): Any amount of money is worth more the sooner it is received, due to its potential earning capacity. The longer you wait, the harder it will be to catch up. Some experts say that for every five years you delay getting started, you may need to double the amount you save each month to reach the same level of income at retirement.

Try our fast and easy online application
Eligible participants can start making 401(k) contributions any time during the calendar year. Visit our 401(k) Center for complete plan information, applications, benefit statements, and other resources. With our new online application, you can wrap up the application process in about a minute.