Like an individual IRA, a 401(k) employer-sponsored retirement program provides you with an opportunity to have a certain amount of payroll deducted from your earnings and invested for retirement savings.
Contributing to your company’s 401(k) plan can be an effective way to save for retirement. Many people find that having money automatically deducted from their pay each month is more conducive to saving than relying on themselves to remember to put money aside. And, best of all, when you retire, your 401(k) retirement plan can supplement the money you’ll get from Social Security.
Other reasons for enrolling in your employer-sponsored 401(k) program are:
Tax advantage. Many employer-sponsored retirement plans provide the benefits of pre-tax contributions to the traditional 401(k) which accumulates tax-deferred until withdrawn, and/or the after-tax contributions to a Roth 401(k) which can provide tax-free distributions at retirement. Limitations and restrictions may apply.
Participant contributions. Once your 401(k) retirement program is in place, your contributions will be automatically deducted from your payroll each pay period.
Investment options. 401(k) retirement plans provide a broad range of investment choices to meet participants’ investment objectives and risk tolerances.
Employer match. Most companies contribute a matching portion of the money you contribute which is additional cash toward your overall retirement. It’s important for you to find out how much you can contribute and invest enough to obtain the maximum amount your company is willing to match. Some companies match dollar for dollar, while others contribute on a percentage basis.
When it comes to saving for retirement, the sooner you start saving for retirement the better potential you have for growing your account. If your employer doesn’t offer a 401(k) program, talk with a Starion Investment Services representative to look at other investment options!