The Importance of a 401k Plan
To properly prepare for retirement, it is crucial that employees have access to a decent 401k plan. Particularly as it is becoming less likely that employees will receive a pension from their employer, 401ks now do all the heavy lifting when it comes to saving up for retirement.
Benefits for Both
Since many employers will match your 401k contributions anywhere from 1%-6%, it is wise as an employee to contribute as much as you can to your fund. Additionally, the money you store in your 401k will not be taxed, allowing you to provide the maximum amount possible. Other benefits 401ks include:
- Compounding interest means exponential savings in the long run
- You can invest more in a 401k than an IRA account
- You get not one, but two tax breaks with a 401k
- Your employer will automatically remove the savings you want to be placed in your 401k, so you don’t have to worry about it
As an employer, it is a good idea to offer benefits like a 401k to your employees because it will boost work morale. A company that shows how grateful they are for all the hard work their staff dedicates to their jobs will, in turn, drive their workers to continue to perform exceptionally, and even try to surpass that.
Why Does it Matter
While employees may choose to invest in an individual retirement account (IRA), savings must be aggressive and disciplined to acquire an amount close to what a 401k could give you. While an IRA account consists of only your savings, a 401k includes, essentially, free money from your employer. It is widely accepted now that Social Security will not be enough to live off of, as it only provides one-third of your income. Since you will need about seventy to ninety percent of your income to live comfortably in retirement, a 401k is essential.
Partner with Us
For help creating a 401k plan that is beneficial to both employees and employers, partner with the professionals at PER. We can help you manage and distribute any HR benefits to your employees, so you can focus more on what really matters for your business. To learn more about our services, call us today at 888.599.4991.