Benefits of the 401(k) plan for the retirees
Retirement is an important phase of an individual’s life. It is important to have a set direction and be able to have a guarantee and some savings set aside for the future. Given the reduction of our capabilities, it is important that we have enough financial assistance for our older age in order to be able to handle any unpredictable situation that might come our way. For this purpose, there are various retirement plans available one of which is the 401(k).
This retirement plan gets its funds from payroll deductions before the income is taxed. These funds can be used in numerous ways some of which would be by investing them in various stocks, bonds, mutual funds, various other assets and none of the capital gains, interest or dividends would have to pass through taxation until they are actually withdrawn.
There are quite a few benefits of taking up a 401(k) retirement plan and investing in it. Some of them would be the tax advantage that it has to offer. A part of the income payroll is directed into the 401(k) plan before taxation, the tax that you will have to pay on your income payroll is only after the withdrawal of the same. The possibility of customization of this investment and the flexibility it offers is one of the major advantages. The employer match programs where the companies try to retain talent by matching a certain percentage of employees’ contribution to a clear benefit. Some companies match up to the first 4% of the employee’s salary and contribute it to their retirement accounts. However, the particular amount of matching changes from one company to another and also depends on various other factors. Although, make sure to verify if such a program is available in the first place in the company that you are working in. The portability, the loan and hardship withdrawals are some of the other advantages of choosing this plan.