Retirement planning is critical in today’s society, and Phoenix Insurance Group understands that. The sooner you begin the planning process, the bigger your nest egg is likely to be when the time for your retirement comes around.

The 401k program is a tool that’s designed to help you maximize the growth of your money. Many employers offer a 401k program as part of an employee benefits package. It’s intended to help employees prepare for a comfortable retirement in the future while enjoying better quality of life today.

What is a 401k?

A 401k is a savings plan for retirement that employers sponsor for their employees. This particular type of retirement savings is funded with pre-tax dollars that the employee contributes to his or her account. Employers may also choose to make deposits into the account on behalf of their employees. Some offer a matching donations (equal to employee contributions) while others match up to a certain percentage of employee contributions.

Benefits of Investing in a 401k

Gone are the days when company pension plans could fund a comfortable retirement. Most workers don’t even stay with one company for the bulk of a career anymore anyway. The end of the line is rapidly approaching for retirements funded, even in part, by Social Security Income contributions faithfully withdrawn from paychecks week after week. That leaves very little to fund the retirements that most Americans have worked so hard to have at some point in the future.

The 401k plan is the next great hope for worry free retirement funding. It’s a way to maximize retirement investments without incurring unpleasant tax penalties – provided everyone follows the rules, of course. Contributing to a 401k provides a few benefits many employees might not realize, though, benefits that make it well worth considering.

Employees are only taxed on the income remaining after their 401k contributions. This means they can effectively lower their tax obligations today.

Many employers match some or all of employee 401k contributions. That’s free money going into employee accounts. While most employers match a percentage of employee contribution up to a percentage of your income, it’s still money employees would not otherwise have for retirement.

Contributed funds can be infested for tax-deferred growth. You don’t pay capital gains on the money earned through your 401k until you withdraw the funds.

You may be able to borrow funds from the account for specific reasons (buying a primary residence, paying for education, paying medical bills, and when you can provide substantial economic hardship). As long as you maintain your employment with the same company while repaying your loan, there are no penalties involved.

Choices abound with 401k plans. Employees can choose how to invest the money between many different options including all of the following:

  • Money Market Funds
  • Bond Mutual Funds
  • Stock Mutual Funds
  • Company Stock
  • Bank Deposit Accounts

The sooner you begin, the bigger your payoff may be. Like most investments, 401k programs offer a risk vs. reward method of investing. People who begin young can take bigger risks while those who wait until later to begin contributing must invest more conservatively in order to protect their interests.

Employer offered 401k programs can be one of the biggest benefits you offer your employees to reward them for all the hard work they do on your behalf. Call us today at: 908-879-6500 and let Phoenix Insurance Group help you make the right decision for this powerful benefit program, and to learn how to protect one of your biggest financial assets.