As an employee, being offered a 401(k) is an exciting workplace milestone, whether you’ve passed the waiting period or are eligible right away. You’re excited to begin planning and saving for your retirement with the help of your employer and are eager to open one. That excitement can quickly diminish if you find out your employer doesn’t match.
You may be wondering, “What’s the point of opening a 401(k) if my employer doesn’t match?” Here are four reasons why you should consider participating in a 401(k).
Easy To Save
401(k) plans are employer-sponsored retirement investment accounts which means your contributions come directly from your paycheck, making it one of the easiest ways to save for retirement. Since it’s set up through your employer, they handle everything and do all the heavy lifting when it comes to managing your account and contributions.
Higher Contribution Limits
Although other retirement plans exist that aren’t employer-sponsored (such as an IRA), they don’t provide the same, highly sought after high contribution limits that a 401(k) provides. The IRA contribution limit for 2020 is $6,000, while the contribution limit for a 401(k) in 2020 is $19,500.
This is entirely dependent on which 401(k) plan you choose, but if you choose a traditional 401(k), then your taxable income will lower since contributions are made before taxes are taken out of your paycheck.
The downside is that you do have to pay taxes at the time you decide to withdraw from your account. However, if you believe you will be in a lower tax bracket in retirement than what you’re currently in, then you won’t have to pay as much in taxes at the time you withdraw.
401(k) plans are flexible, and part of this means that you can take them with you when you switch employers. This means that you can keep your retirement and won’t lose it when you leave for a new company.
You could also finally get the employer matching benefit when you rollover if it’s something your employer offers.
The moral of the story, even if your current employer doesn’t match, you should still consider opening a 401(k) account. Despite not receiving an extra contribution, you’re still saving for your future and being financially responsible, something your future self will thank you for. Does your employer not offer a 401(k)? Have them reach out to us today to start one!
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