Eight Reasons to Love Your Employer's Retirement Plan
Have you put off enrolling in your company's retirement plan? Or do you ever wonder if you could do better saving for retirement on your own? If so, consider some of the wonderful benefits you can enjoy as a participant in your company's retirement plan.
Benefit 1: Lower taxes
Your employer's defined-contribution retirement plan is expressly designed to help you save for your retirement. Federal and sometimes state taxes on your contributions and the investment earnings are deferred until you receive a distribution from the plan at retirement.
Benefit 2: You Decide
You decide how much to contribute and how to allocate those contributions. This can give you the advantage of diversification* — a well-balanced mix of investment choices as opposed to any single investment you might make.
*No investment strategy, such as diversification or asset allocation, can guarantee a profit or protect against loss in periods of declining value.
Benefit 3: Contributions are automatic
You can pay as much attention to the retirement account as you like, but contributions are made for you automatically. It's a simple method of disciplined savings.
Benefit 4: Employer Match
Many employers will match some of your contributions — for example 50 cents on the dollar up to six percent for a total of three percent of your salary. That's extra contributions to help increase your retirement savings.
Benefit 5: It's your contributions
You always own the contributions you make to your employer's plan. And thanks to vesting, after a set period of time, you may have access to the retirement funds that your employer contributed to the account held for your benefit. If you change employers, eligible funds may be distributed.
Benefit 6: Inexpensive loans
Some plans allow you to borrow a percentage of the account value at a relatively low interest rate. Keep in mind though, that you have to pay regular payments plus interest on the loan. Also, if you leave your employer and owe money to the plan, you may face penalties if you don’t pay up immediately.
Benefit 7: Emergency withdrawals
You may be able to take a lump-sum distribution before you retire, generally for emergencies only. You'll pay a 10% penalty and federal and state income taxes. While this is good to have if you have no other options, keep in mind that your employer's plan is a retirement savings plan, not a rainy day fund.
Benefit 8: It goes with you
Unlike many old-fashioned pension plans, you don't lose everything when you change jobs. Today's retirement plans allow rollovers to an Individual Retirement Account, which can later be rolled over to a new employer's retirement plan if you like.
Take the next step...
Prepare for a great retirement! Sign up for a personal retirement plan today. Already enrolled? Login to view your account information, rebalance investment options and more.
