If you like the sound of “automated savings” that can help you live the retirement lifestyle you deserve, here are 5 more reasons to contribute to your 401(k).
September 6th is National 401(k) Day!
One of your most impactful opportunities to save, and even earn, over time is by investing in your 401(k). You may be familiar with some of the benefits, from employer contributions to reduced taxes. But did you also know that your savings can compound over time, generating even more income for retirement? See why 401(k) accounts are a preferred choice for many investors and the potential benefits they offer:
1: 401(k) Contributions are “Before Tax” Money
With a traditional 401(k), your contributions are deducted from your gross income. In other words, any tax-deductible contributions are removed from your paycheck before taxes. Taxes aren’t deducted from your contributions or any investment earnings from that account until you withdraw the money.
2: When You Finally Pay Taxes on Your 401(k), It May Be at a Lower Rate
A 401(k) can have significant tax advantages. Here’s why: Your retirement contributions are deducted from each paycheck pre-tax. Since traditional 401(k) contributions are made before taxes, they don’t count toward your taxable income, which means your tax burden for the year will be lower.
3: Your Employer May Contribute to Your Retirement Plan
One of the biggest advantages of an employer-based 401(k) is that it’s an easy way to start saving for retirement. Not only are your contributions automatically deducted from your paycheck, but your employer may also choose to make matching contributions, up to a certain amount. If your company offers this, you may want to consider taking full advantage of this added benefit.
4: Assets Protected from Creditors
In the event of bankruptcy or issues with creditors, your 401(k) assets are generally safe due to the Employee Retirement Income Security Act.
5: You Can Compound Your Money
In the financial world, a compounding 401(k) is about as close as it gets to making money easily. Depending on your plan’s policy, interest is often compounded on a daily, monthly, quarterly, or annual basis.
If you have questions about how to maximize your 401(k) account, contact our team!
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.