- Investment options: Most 401(k) plans offer participants a variety of investment options including money market funds, stocks, bonds, company stock and more.
- Matching contributions: Many employers have a 401(k) matching program, matching a portion of an employee’s plan contributions. The percentage match will be listed in the 401(k) plan document, but a typical match is 25 or 50 percent, up to a percentage of a person’s salary. For example, an employer might match 50 percent up to 6 percent of someone’s salary. Matching is subject to the plan’s vesting schedule.
- Tax-deferred earnings: Individual contributions to a 401(k) plan are made pre-tax, lowering an employee’s taxable income. Contributions are taxed at retirement when an individual’s tax bracket may be lower than in his or her income-producing years.
- Loans: Some plans have a loan provision where plan participants can withdraw money from their 401(k) plan for stated reasons, such as buying a home, paying educational or health expenses, or covering a significant financial hardship. Loans must be repaid according to the 401(k) plan document.
These advantages and more make 401(k) plans a good choice for many people as they plan for their retirement. To find out if a 401(k) plan is an optimal investment for you, contact us today. Synergy’s financial experts can evaluate your current financial situation and retirement savings options to design a retirement plan ideal for you.
To your wealth,
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance