Five benefits of a workplace retirement plan
Retirement plans can go by many names—savings plans, retirement plans, workplace retirement plans, or 401(k), 403(b) or 457 plans—but they all help prepare you for a confident retirement.
Save more by participating in your employer-sponsored retirement plan
Most plans allow you to contribute money with automatic payroll deductions. They also offer multiple investment options. To make participating in the plan even more attractive, many employers match part of what you save. Take a look at the benefits of participation:
1. Convenient automatic deductions
You decide how much to put in the retirement plan, and your employer takes it directly from your paycheck.
2. Consistent savings
You’re more likely to save on a steady basis when you don’t have to think about it or take action with each paycheck. You may want to increase your contributions when you get a pay increase or extra cash.
3. Reduced taxes
Your employer may take your retirement savings from your pay before deducting taxes. This reduces your taxable income and the amount of taxes you pay at the time of your contribution.
Note: Some employers also allow after-tax contributions to their retirement plans.
4. Tax-deferred growth
Your savings, plus any match or earnings on your investments, will grow tax-deferred. You won’t pay taxes on them until you withdraw money from the plan. If you wait until retirement to take the money out, your tax rate may be lower.
Note: Some plans also offer after-tax Roth contributions. Because these contributions are made with after-tax dollars, qualified withdrawals aren’t taxed when you take money out in retirement.1 Learn more about pretax and after-tax contributions.
5. Employer match
Your employer may match some or all of what you save. For example, your employer might add 25 cents for every dollar you put in the plan, up to a certain limit. The match is like free money, adding to your savings total.
Save now, not later
It’s easy to put off saving for your future. But saving today can make a big difference in the long-run.
Use this easy debt calculator to find out.
1Withdrawals before age 59 ½ may be subject to a 10% federal tax penalty.