Top 10 Most Important Reasons You Should Know to join 401 k Plans

Top 10 Most Important Reasons You Should Know to join 401 k Plans

There are many savings plan available in the private corporate sector. Every company has their own preferences. However, there are very few plans which are better than a 401(k) plan.

The 10 Most Important Terms You Should Know

Following are some of the reasons why you should join 401(k) plans;

1. It is Effortless

An employer makes the deductions automatically from the wages of an employee. You need not write a check or sign a couple dozen documents every time. Most people do not even miss the deduction. Contributions to the plan can be set amount of dollars, or it could be set amount of percentage of pay.

2. Free Money

The employer is required to make equal contributions in the 401(k) plan as you do. More than 60% of such plans offer some kind of matching contribution from the employer to encourage participation.

3. Tax Breaks

You are likely to get two tax breaks upon participating in a 401(k) plan. These tax-breaks are;

  • Your contributions in the plan are tax deductible. It means, the contributed amount is not counted as part of your gross income.
  • The money is allowed to grow tax-deferred. The money saved is not counted as income until it is withdrawn.

The savings grow faster because of these two incredible advantages.

4. Interest Compounding

The earnings in a 401(k) plan are put right back in to the account. This allows the interest to build up on the original principal plus interest. There could be exponential gains at the end of long-term financial plans.

5. No Losses

Dollar cost averaging allow you to buy low and sell high. Almost all experienced investors use this strategy. You can buy fewer shares when prices are high and more shares when prices are low. This lowers the per unit cost of your shares. Users of 401(k) plan use this strategy automatically. That is so because they make a fixed contribution with every paycheck.

6. Excess Contributions

You can contribute more amount to a 401(k) plan than to an Individual Retirement Account (IRA). Outstanding 401(k) plans obtained here can set your future for the better.

7. Sound Investment

It is an inexpensive and risk-free way to create a professionally acclaimed diversified investment portfolio. Many funds and plans require a minimum investment from the investors. This plan allows you to avoid such contribution. You can put as much money you have in this fund. Moreover, most of the legwork to find a proper investment falls unto your employer.

8. Withdrawal Authorization

You are allowed to make withdrawals of money from you plan in case of an emergency. You need not suffer from a loan or any other hardship because of the lack of funds. however, this money is meant for retirement. Therefore, this early withdrawal comes with its own set of conditions. You must only disturb the funds in retirement plan after you have exhausted all other avenues of funds collection.

9. Transition of Funds with Job

If you change jobs, you are authorized to take your funds with you. You can just roll over the funds to an IRA plan. This will allow you to maintain the tax-deferred status of your savings.

10. Social Security

Social security is not a very comprehensive plan. It is meant to provide merely a percentage of your retirement income. There are also several other uncertainties attached with this. A 401(k) plan could be very good replacement for that.

How Do I Take Advantage of This 401 k Plans?

SGA Financial Inc. is one of the best insurance firms that offers the best deals and policies in the market. If you ever need access to favorable 401(k) plans for your employees, do not hesitate to contact us. We have vast experience in dealing with various retirement plans. We can offer you the best deals at lowest rates.