Five Reasons to LOVE your 401k Plan

Five Reasons to Love Your 401k Plan

Why Save for Retirement?
Download our infographic on why it is important to save for retirement.

Traveling the world with a loved one, living comfortably through old age, taking care of a grandkid’s college expenses – if any of these have ever appealed to you, you understand the importance of having enough in your nest egg to retire comfortably one day. That’s why a 401k plan is an excellent option when it comes to putting away money for the future. So, if you’ve ever wondered about your decision to put money away in your company’s retirement plan, here are five reasons why you should love your 401k plan.

 401k Tax Benefits

The most well-known benefit of having a 401k plan is the tax benefits it provides. With a 401k, your contributions are made with pre-tax dollars, which means you won’t have to pay taxes on them until you withdraw from the account in retirement. In addition, many employers offer matching contributions up to a certain amount, and those employer contributions are also tax-free until withdrawal. This means that your money grows faster and more efficiently than if it were subject to taxation every year.

Automatic Savings

Another great benefit of having a 401k plan is that it encourages automatic savings. Once you set up your account and decide how much you want to contribute each month, the plan will automatically deduct that amount from your paycheck and deposit it into your account before taxes are taken out. This makes it easier for contractors who may not have steady income streams or who struggle to save money on their own.

Compound Interest

Start investing early to watch your investment grow. One of the biggest advantages of investing in a 401k early is compound interest. Compound interest is when you earn interest on the initial amount of money you put in plus any accumulated interest. In other words, it’s when you earn interest on interest—watch your money work for you!

Employer Matching Contributions

Many employers offer matching contributions up to a certain amount when their employees enroll in their 401k plans. This means that for every dollar contributed by an employee into their retirement savings account, the employer will match it with some percentage – often up to 6%. This gives employees the opportunity to maximize their potential returns by taking advantage of this extra contribution from their employer – essentially free money!

It’s ALWAYS your money – your 401k goes where you go!

If you leave your current job, your 401k and earnings are yours to keep. You have the option to keep your funds in your previous plan, roll them over into a new employer’s plan, or place them into an IRA/Roth IRA. You may also choose to withdraw those funds, but if you’re under 59, you can be hit with early withdrawal penalties.

A 401K plan offers many advantages for those looking for an effective way to save for retirement without sacrificing current spending power or risking large losses in market downturns or economic recessions. When you combine all the above features into one package, it’s hard to find a better way to prepare for future financial security than through opening up and contributing regularly towards your own 401k plan!

If you have financial questions regarding your 401k plan, visit your advisor. If you want to start a retirement plan for your employees, contact the Beneco team today!