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6 Benefits of 401k Retirement Plans that you should know about in 2024

January 04, 2024

A 401(k) plan is a retirement savings option that allows employees to save and invest a portion of their pre-tax earnings. In today's post, we will discuss the major benefits of 401(k) plans for both employees and employers.

Benefits of 401(k) Plans to Employees:

Benefit 1: Tax Benefits

Firstly, 401(k) plans offer valuable tax benefits to employees. Contributions made to the plan are taken from pre-tax income, reducing taxable income and potentially lowering the tax bill. Participants also contribute with after tax dollars (ROTH 401k). In the Roth option, only the employee portion is post tax. The Employer portion is pre-tax. Moreover, any investment gains within the plan are tax-deferred until withdrawal, allowing for potential compound growth over time.

Benefit 2: Employer Match

Secondly, many employers offer a 401(k) match. This employer match can serve as an additional incentive for employees to save more for retirement, boosting overall savings rates.

Benefit 3: Retirement Savings

Lastly, participating in a 401(k) plan enables employees to save toward their retirement plan and potentially build a secure financial future. These savings can help provide financial security in their retirement years.

Benefits of 401(k) Plans to Employers

Benefit 1: Attract and Retain Talent

Offering a comprehensive 401(k) plan helps employers attract and retain top talent. It shows that the company values its employees and invests in their future, making it an appealing benefit package for prospective employees.

Benefit 2: Tax Benefits

Employers who sponsor a 401(k) plan are eligible for tax benefits. Employer contributions to the plan are tax-deductible, reducing the company's tax liability.

Benefit 3: Cost Savings

Finally, employers may save on payroll taxes by offering a 401(k) plan. Employee contributions to the plan are exempt from Social Security and Medicare taxes, leading to cost savings in overall payroll taxes.

Whether you are an employee or an employer, a 401(k) plan can offer significant benefits.

Securing your financial future and protecting your loved ones' interests starts with proper retirement planning. To explore how a 401(k) plan can benefit you or your organization, please use the link below to schedule a meeting today!

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Note: Investment strategies and specific investments mentioned may not be suitable for everyone. Individual decisions should be made after careful consideration of one's financial objectives, situation, and needs. This information is not intended as a personalized recommendation. Seeking advice from a personal investment advisor is recommended.

Please note that representatives do not offer tax or legal advice. Discussions related to taxes are purely informational, not exhaustive, and should not be interpreted as legal, tax, or accounting advice. It is advisable for clients to consult with qualified legal, tax, and accounting advisors as needed.

Securities and investment advisory services are provided through registered representatives of MML Investors Services, LLC, a member of SIPC.