401(k) plans are a classic job benefit, and they are gaining even more popularity today. Having a retirement plan is an important attraction for many employees, and in fact, 68% of workers will inquire about their employer’s retirement plan when applying for a job. A good 401(k) plan can attract and retain top talent, as well as save employers money in the long run. In fact, it costs an employer as much as 29% to 46% of annual salary to replace one employee.
Employer matching is a great perk of 401(k) plans, as it allows employers to match up to fifty cents on the dollar from your salary. Employers should use their marketing resources to make the plan more appealing to various employee demographics. 401(k) advisers should emphasize their service to employees and not only the monetary benefits. Moreover, it’s important to understand the importance of 401(k) benefits, and make sure to tailor your communications to each group.
Unlike taxable accounts, contributions to a 401(k) plan are pre-tax. This means that you can deduct these contributions from your income before calculating your income tax. By saving for retirement, you’ll enjoy lower tax bills. While these contributions may seem like a hassle, they can be beneficial in many ways. These contributions reduce your taxable income, allowing you to accumulate retirement savings faster. Further, if you choose a Roth 401(k), you’ll not have to pay taxes until you retire.
