Why Invest in a 401(k)?
A 401(k) Plan is an employer-sponsored retirement plan available to employees. There are many benefits to participating in your company’s plan: 1
- Employer match
- High contribution limits
- Potential early penalty-free access
- Protected assets
- IRA aggregation rule exemption
- Tax-advantaged savings
The money you save in taxes is a huge benefit. Contributions are taken out of your paycheck before taxes are deducted. Your gross income is reduced, helping you pay less in income taxes. 2
As your retirement account grows in value over time, you don’t pay taxes on the gains. You only pay taxes when you start to withdraw money at age 59 ½. By then, you may even be in a lower tax bracket. Since you’re not paying taxes, your 401(k) money can grow more quickly.
Think about how difficult it is to save money. Something always comes up. By contributing to your 401(k), you never receive the money that’s deducted from your paycheck and therefore can’t spend it. It’s forced savings.
Remember, the earlier you start, the larger your account will be at retirement. Contact us at APAdvisors.com or at 866.515.2742 to help answer any questions your may have about your company’s 401(k) plan.
1 https://www.fool.com/retirement/plans/401k/benefits/
2 https://iconsavingsplan.com/the-basics/start-saving/why-401k-plans-are-so-great/#:~:text=One%20of%20the%20most%20powerful,pay%20less%20in%20income%20taxes
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