Something many Americans don’t seem to know is that by having a 401(k) retirement plan, they will get more money.
Out of all people eligible for retirement plans that employers sponsor, 17%, or one in ten, Americans aren’t taking advantage of it.
Those that do aren’t taking full advantage of the match their employer will make.
Traditional plans allow for income taxes to be reduced for the year they’re made, but taxes are paid when cash is withdrawn.
In a Roth account, the taxes are paid up front.
With a 401k, employers match employees contributions, and some go as far as offering 5% off each paycheck.
If an employer matches 5% of a weekly paycheck worth $500, then the employer will put $25 a week into the 401k. This will match the $25 the employee is also putting in, making it $50 per week.
For the year that’s $2,400 placed into an account.
The issue? People can’t afford to do it.
If possible, it’s a good idea to find ways to save that amount of cash and be able to put it into an account for life in the future.
For those that can’t open one through their employer, they can always open an IRA.
Related: New York will force IRA savings plans onto small businesses: Over 2 million workers will gain retirement savings though
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