401(k) Plans - Good for You and Your Employees
401(k)'s are the premier savings and investment vehicle for American workers.
In fact, workers today care just as much about their work environment, the employee benefits available to them, and the opportunity to plan and save for the future as much as they do the size of their paychecks.
Offering your employees the opportunity to participate in a 401k plan is a benefit to you as an employer nearly as much as it is for your employees.
Are you aware of the many benefits that a 401(k) offer to both employees and their employers?
401(k) Benefits for Employees
One of the most valuable things you can offer your employees is the opportunity to participate in a 401(k) plan. Nearly every employees' retirement hinges on the opportunity to make "before-tax" contributions and enjoy tax-deferred savings growth. Without these benefits, saving for retirement is an extremely difficult task.
Experts agree that the average retiree in America wil need between 60 and 80 percent of their pre-retirement income to live a reasonably comfortable lifestyle after retirement, a quality of life comperable to what they enjoyed while they were working. A 401(k) is the perfect tool to prepare for that, since it offers the following benefits:
- Immediate tax savings on contribution since they are deducted from your paycheck before taxes.
- The earnings on your 401(k) are deferred until you make withdrawls.
- The ability to loan yourself money from your own 401(k), up to a limit of $50,000.
- Free money if your fortunate enough to have an employer that matches part of your contributions.
- You choose how much to contribute from each paycheck, subject to certain limits.
This deferral of taxes is invaluable. Since you don't pay taxes until you withdrawl your money, you will likely be in a lower tax bracket than you are now (since you're retired) or better yet...you may retire in a state that HAS NO INCOME TAX!
It is important to note that although you can tap into your 401k to loan yourself money for something important like buying a house or to cover an emergency expense, this should be done only as a LAST RESORT. That's because you have to repay the loan with interest (which goes back into your account) or you may change employers before the loan is repaid, a move will trigger an IRS rule requiring immediate repayment (back into your 401(k) account) WITH INTEREST.
If your fortunate enough to have an employer that that matches your contribution into your 401k, then it is crucial they you commit to kicking in every dollar you can from each paycheck to get the maximum contribution from your employer.
To contribute an amount that will get you less a contribution from your company is to throw away free money. Don't let the opportunity to have your company contribute to your retirement slip by for the sake of a few extra bucks in your current paycheck. At retirement time, you'll be glad you made this decision.
401k) Benefits for Employers
Did you know that any costs your firm incurs with operating a 401k plan can be deducted at tax time? This includes any matching contributions your company makes to the plan!
Plus, if you have at least one employee and this is your company's first 401(k) plan, your company is eligible for an annual federal tax credit of $500 for each of the plan's first three years. That's an extra $1,500 in addition to the other benefits of offering your employees a 401(k).
Of course the biggest benefit to offering your employees a 401(k) is that a 401(k) is a tremendous tool for attracting talented and loyal employees. Let's face it, everyone is concerned about having enough to retire comfortably. Without a 401(k) to contribute to, workers are left with an IRA or Roth IRA, both of which have much lower contribution limits.
As the plan trustee, you may be able to determine who is eligible to participate, whether your company will match contributions and how much to match, how long before employees become vested, and more.
Select is pleased to offer company's our "Almost Free 401(k) Plan" which has the lowest fees and expenses in the marketplace and a myriad of investment options. To learn more about it as well as the benefits of establishing a 401(k) plan for your business, simply call us at 800-390-4620 ext.106 to speak with a representative today. You can also contact us here.
