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More and more people from all walks of life and concerned about having enough money for comfortable retirement, each with their own specific needs. While younger people have plenty of time to save before retirement, people who are closer to retirement may have to play catch-up, if they are among the many who have had a low rate of savings in the past. Both groups have differing concerns and needs. Tax-deferred saving vehicles are looked at as especially appropriate for a variety of individuals to maximize the returns on dollars saved while still meeting concerns about risk.
The employer-sponsored 401(k) Plan is one tax-deferred means of saving for retirement that is beneficial to both employers and employees. These plans often provide cost-saving opportunities for business owners over traditional pension plans. And they are advantageous for all levels of employees from executives to hourly-paid, because they can deposit pre-taxed money into a retirement savings plan.
Employees appreciate the benefit. The 401(k) plan is viewed as a tax-deferred way for them to save their money, and the employer has the option of offering its own matching funds to increase the benefit and incentive to contribute. Employees can see their money in their personal account, and they know their employer is making this tax-deferred savings vehicle possible for them. Additionally, major corporations sometimes offer 401(k) plans in conjunction with other employer-sponsored retirement programs, allowing employees to supplement more traditional pension plans.
At many small and mid-sized employers, 401(k) is the primary retirement plan. Smaller employers are attracted to these plans in the face of the increase cost of funding and administering traditional pension plans, which can be unaffordable. With traditional plans, employers likely will pay a much larger share of the cost.
To find out more about 401(k) plans, contact a financial professional, who can help employers to investigate, implement and fund a 401(k) Plan.
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