401 K Employer Match For Substantial Retirement Savings

401K Employer Match For Substantial Retirement Savings

by

Smith George

What is 401K? 401K is a retirement savings plan set up through your employer to encourage saving substantial amount of funds for your retirement years. A fixed percentage of the pre-taxed income is contributed to this account from the monthly paycheck. These contributions are invested in mutual funds, stocks, and bonds etc that earn high returns over the years.

To encourage employees to take the best advantage of this opportunity and to save for their retirement years, many employers offer to match an employee s 401K contributions up to a certain percentage or limit. 401K employer match is the best way to retain potential resources. But to take full advantage of employer matching it is always important to ascertain the investment options in the 401K plan.

An employer chooses to contribute in either of the following ways. Dollar to dollar match for all employee contributions up to a certain percentage of the employee s salary (i.e. 100 % of contributions matched up to 6 %).

Though the 401 K employer match may seem to be a very small percentage, but over the years gets accumulated as a substantial amount earning high returns. By the time you attain your retirement age, this amount grows into a respectable amount that allows you to retire without giving a second thought.

401K employer match is the organization s way of profit sharing as the company gives you additional compensation towards retirement. An employee contributes to the overall growth and development of the organization. Employer matching contributions is a way to reward employees for inputs to the company s profit.

401K employer match may also prove to be a motivational factor for an employee to work hard in order to earn higher employer contributions when he makes more contributions from his pre-tax pay check. It is not mandatory for an employer to match his employee s contributions, but the best set up 401K plans offer to match.

401K employer matching contributions is the best way to assess the quality of a 401K plan. A good quality 401K plan offers low cost market index funds that have very low expenses that allow your and 401K employer match work for your retirement.

Some employers have a required amount of time you need to be employed with them to receive the 401K employer match. Typically a common employer match is a 3% match which means that if you save 3% of your paycheck, the employers contribute the same amount of 3%. Many employees commit the mistake of saving just 1% of their paycheck, but the employer just matches that 1% and not 3%.

401 K plans are protected under the Employee Retirement Income Security Act of 1974, or ERISA .If an employer gets bankrupt or goes out of business, the 401K money of its employees is saved and protected from the creditors to settle any debts.

If you are not aware about your organization s 401 K employer match, then an employee must contact his Human resource department so that he does not miss out any more money for his future.

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