Elective-Deferral Contribution

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Definition of 'Elective-Deferral Contribution'

An elective-deferral contribution is a portion of an employee's salary that is withheld from their paycheck and invested in a retirement plan. The employee decides how much to contribute, and the contributions are made on a pre-tax basis, which means they are not subject to income tax. Elective-deferral contributions are a great way to save for retirement, and they can help employees reach their financial goals.

There are a few things to keep in mind when making elective-deferral contributions. First, employees should make sure that they are contributing enough to meet their employer's matching contribution, if one is offered. Second, employees should consider their overall financial situation before making elective-deferral contributions. If they have other financial goals, such as saving for a down payment on a house, they may want to contribute less to their retirement plan.

Elective-deferral contributions are a great way to save for retirement, but it is important to understand how they work before making any decisions. By doing your research and planning ahead, you can make the most of your elective-deferral contributions and reach your financial goals.

In addition to the tax benefits, elective-deferral contributions can also help employees save for retirement in a number of other ways. For example, elective-deferral contributions can help employees:

* Increase their savings rate.
* Get started with saving for retirement early.
* Take advantage of compound interest.
* Diversify their investment portfolio.

Elective-deferral contributions are a great way for employees to save for retirement. By understanding how they work and making the most of them, employees can reach their financial goals and enjoy a secure retirement.

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