Jamie Ann Hayes, QPFC, C(k)P, AIF(r)

Jamie Ann Hayes, QPFC, C(k)P, AIF(r), Partner and Consultant of FiduciaryFirst, specializes in Employer Retirement Plan Fiduciary Services and Corporate Pension Consulting.

Five Reasons Your Employees Should Love Your 401(k) plan

A 401(k) plan is a powerful tool for saving for retirement, and almost everyone can benefit from participating in a 401(k) plan. Some of the reasons a 401(k) plan may be a good idea for your employees include:

  • They save on taxes, and their money grows tax-deferred. Contributions to a 401(k) plan are not taxed as current income, which means participants pay less in taxes each year. The investment earnings on funds in the plan are also not taxed as long as they stay within the plan, which means the money participants would normally pay in taxes on earnings continue to earn money for them. They’ll eventually pay taxes on both contributions and earnings, but if they withdraw the funds after retirement, they may well be in a lower tax bracket than they are now.

  • Their money belongs to them. Unlike employer-provided pension plans, participants own their 401(k) contributions. As their employer, you may choose to provide matching contributions, and those funds also belong to them as long as they’re vested. Employer pensions, which are increasingly rare, could be reduced or disappear if the company goes bankrupt.

  • Participants can defer much higher amounts that they can with an individual retirement account (IRA). The contribution limit for 2013 is $17,500 for individuals, with a catch-up contribution limit of $5,500 for people age 50 and over. The IRA limit is $5,500.

  • It’s automatic. Participants decide how much they want taken from each paycheck, and those deductions from are taken automatically, making a 401(k) an easy and reliable way to save. Because the money never passes through the employee’s hands, he or she isn’t tempted to spend it or skip a contribution.

  • Participants control their investments. With a 401(k), participants can typically choose their investments from a menu of options, ranging from very conservative to more aggressive investments. Plan providers will offer educational materials to help them assess their fiduciary risk tolerances and set up a customized program that’s right for them, but participants are always in charge of their investments.

For these and other reasons, 401(k) plans have become the leading way for employers to provide a retirement benefit, and they are affordable for any size company. If you want to establish a 401(k) plan for your employees, FiduciaryFirst can help you design a plan that meets your company’s goals while helping your employees prepare for retirement. Contact us at fiduciaryfirst.com or call (407) 740-6111.

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