Fortune Magazine is looking at 10 Rules for Building Wealth, and here is the second item on the list: Use your 401(k).
If you have access to a 401(k) or 403(b) at your job, particularly if the plan offers employer match, then it makes sense to invest in the plan. The employer match is basically free money, even if the investment options aren’t spectacular. If there is no match offered, you should probably weigh your other tax-advantaged investment options, like a traditional or Roth IRA, against the 401(k) choices.
Fortune has an additional thought:
New pension legislation is encouraging companies to offer third-party investment advisory services, so call HR to find out if yours offers any on-the-house guidance.
If you are self-employed through a corporation or a sole proprietorship, the Solo 401(k) is another option, but once again, weight investment options and take fees into account. Unless I quit my day job, I won’t have an opportunity to test the waters with a Solo 401(k).
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If one is both employed (W-2) and has significant income through an LLC (1099), can LLC income be invested in a solo 401(k)? Unfortunately Roth is not an option due to its income cutoff.
Rule for building wealth simply means ” He who has the gold rules.” In this way having 401(K) saving plan for investment purposes especially for mutual bond is adhering to the golden rule on how to build wealth. Save, save and save and invest all interest earnings by procuring stock, bonds and treasury bills would enable a person build wealth beyond compare. Save but do not hoard as it is unproductive. Diversify investments to minimize and decrease the probability of investment risk. I always believe that life is a matter of adhering to the natural and scientific law of nature: ” The accumulation of wealth attracts more wealth as the proposition and advocacies of poverty attracts more poverty.”