The 401(k) is the most popular type of corporate retirement
plan. There are multiple benefits to taking advantage of
a 401(k) including:
- Employees contribute part of the money into the fund
- It reduces your tax obligation
- Earnings without your taking an active role in depositing money or deciding on investments
It is the third of these that leaves some couples without
the amount of money they expected to have in savings when their retirement day rolls
around. Either your employer or you may determine how much money is deposited
into your retirement account, but it may not be the right amount to meet your
goals. Employees usually have the option to contribute up to 15% of their
salary into their account but the majority only contribute between 5 and 7
percent of their pre-tax income. Richard Brothers explains that “We work with
companies to design an appealing benefits package that will help increase
participation in 401(k) corporate
retirement plan.
Why Do
Employers Want Employees to Participate in a 401(k)?
Most employers match the money that employees make to their
retirement account. This provides incentive to employees and helps them attract
and retain the best talent for their company. It also helps to reduce payroll
taxes but the biggest advantage to the employer for offering a corporate
retirement plan is building employee loyalty.
Why Employees
Need Options
One reason that some employees may not invest
fully into a corporate retirement plan is that they need more of their income
now. They simply don’t have the option to invest 15% of their income because
they have greater financial obligations than some others do. When determining
the 401(k) plan that you will offer at your company, it needs to come with a
variety of options to meet the various needs of employees. Knowing that they
can invest in a way that is financially comfortable for them will increase the
likelihood that they will participate in the plan and appreciate it for the
benefit that it is.
Educate
Your Employees
Most employees have no idea of what to expect when
investing money for the first time. If it were up to them to manage their
corporate retirement plan, they would be stuck at step 1. This is why you need
to engage employees and offer them an education on exactly how their retirement
plan will work. The more they understand, the more comfortable they will be in
investing their money and working to make their future financially secure.
Implementing a corporate retirement plan for the
first time can be intimidating to the company owner as well. Hiring a company
of financial advisors with expertise in building retirement packages and a
track record of success will help ensure that the plan you offer your employees
is compliant and affordable for you and appealing to your employees. Managing a
401(k) is an important and complex job for any company leader. The right
financial advisors will ensure that it is a good choice that benefits everyone
involved and that it helps you and your employees meet your goals.
