Top Ten 401K Benefits
1. Automatic Deductions- One of the top 401k benefits is that your contributions are directly deducted from your earnings. This makes your retirement fund contributions easy and convenient, because you do not have to do anything for the contribution to be made.
2. Tax Deductible Contributions- All contributions to 401k retirement plans are tax deductible, and are deducted before taxes are calculated. The funds from your account are not taxed until they are withdrawn.
3. Free Money With Employer Matching Contributions- Many employers match the amount contributed by their employees, and if you have this option you should contribute the maximum amount that your employer will match. This is free money for your retirement.
4. Tax Deferred Earnings- One of the most popular 401k benefits is that any earnings you make on the account are tax deferred, because they are added to your account balance instead of being paid directly to you.
5. Compounded Interest- Compounded interest is one of the most effective tools available to help your money grow faster. All contributions will earn compounded interest over the life of the account, including any 401k catch up contribution made before the account starts paying out.
6. Higher Contribution Limits Than An IRA- A 410k plan allows you to contribute more each year towards your retirement than an IRA plan will, and this can make a big difference by the time you are ready to retire.
7. No Minimum Investment Required- No minimum investment required is one of the top ten 401k benefits for many who contribute to these plans. With a mutual fund or other investment type you would need a minimum amount to start an account, but this is not the case with a 401k.
8. Small Business Owners Can Benefit- A safe harbor 401k allows small business owners to set up this type of retirement account. Whether you are an employee of a large company or the boss and sole employee of a small business, planning for your retirement is a great financial decision to exercise.
9. Account Stays With You If You Change Employers- One of the top 401k benefits is that your retirement account follows you and not your employer. If you change jobs then you do not lose your account.
10. Loans And Hardship Withdrawals May Be Possible If Needed- Under most 401k distribution rules it may be possible to borrow against your balance if needed, and a hardship withdrawal is always an option under certain circumstances.