401k plans The Savior for the Retirement Age, Call us @ 614-396-7652 for more details

A 401(k) is one of the main retirement savings vehicles available to those that are employed in the US. The money comes right out of your paycheck before most taxes are even taken out of it where it then grows in a tax free account until retirement. While the name “401(k)” has become synonymous in American culture with saving for retirement, most people are not aware it actually refers to the particular IRS tax code that brought these plans into existence in 1978. Prior to that, most companies had pension plans that were becoming increasingly hard to afford, or profit sharing plans that gave many employers little advantages. And with that, the retirement plans in America would change dramatically, giving employees more control over their lifestyle in retirement.

There are various benefits of the 401(k) plan for both the employers as well as the employees. These benefits are as follows. 

Business benefits of 401(k) Retirement Plans are:

• The cost to the company is reduced through tax credits and deductions as well as various other incentives for starting a new plan.

• It is a very good tool to attract and retain employees through the use of vesting schedules that reward your long -term employees, while limiting or lowering costs for short-timers and high turnover positions.

• Owners can diversify their investments from their company into a broad range of investments, limiting risk and allowing it to grow tax free. 

• 401(k) plans offer a broad range of flexibility from plans that require no employer contributions, creative match types to encourage employees to save, rewarding employees for a good year through profit sharing, or other creative tax strategies that can include cash balance plans for high income industries.

• Best of all, employer contributions are completely tax-deductible, and companies who reward employees in these plans versus in their take home pay can lower their payroll taxes, too.

• Many studies have also shown that properly run plans can even help lower financial stress of your employees, leading to increased productivity, lower rate of sick days used, and even lower medical costs since older employees are able to retire earlier.

Employee benefits of 401(k) Retirement Plans are: 

• Employees gain control of a great investment vehicle meant to be simple and easy for them to control and make contributions. 

• Some low-income employees can be eligible for additional tax credits for saving, up to 50% of what they put in.

• Assets are protected from creditors, including bankruptcy, but also don’t count against certain government assistance programs.

• Contributions reduce your employee’s taxable income. 

• Whether pre-tax or ROTH contributions are made, the assets grow tax free until they are withdrawn for retirement.

• Assets from the plan are easily transferable to a new employers’ 401(k) plan or an IRA.

While this is just a short list of some of the advantages, each 401(k) plan is as unique and customizable as the companies that sponsor them and their reasons for offering a plan. Whether you just want to offer your employees a way to save, you are looking for tax savings, or trying to attract and retain employees, a customized plan can help you accomplish these goals and others.

 The fact remains that these plans are also some of the most affordable benefits an employer can offer, with most companies fewer than 50 employees being able to start a plan for under $2,000 a year, while also getting a $500 tax credit, and no requirement for employee contributions. 

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