Why is it good to have a company sponsored retirement plan?
I would like to know why it is so amazing to have a company sponsored retirement plan, and some benefits. #computer-software #computer #video-games #computer-games #video-game-design #video-production #video-game-development #video-game-production #career-details
It honestly depends on your level of discipline when it comes to savings and benefits.
If a company provides it, then the company is assuming some of the costs of your health care and may be contributing to your savings (that's a great deal!)
If the company does not provide it, then you are responsible for yourself, and many people wait too late to start saving.
Think of it this way ... you're 65 years old and would LOVE to retire, EXCEPT, you were responsible for yourself and didn't save anything. The last thing you need to have happen is lose your job now because you would most likely have to start over from the beginning with most probably a lower salary.
Now .. if you started saving as soon as your first job started, interest compounds over time, so there should be a nice savings for when you're 65.
John Randall’s Answer
A company sponsored retirement plan benefit is that the company usually matches the employees' contributions up to a predetermined amount. ie. free money for you. Another benefit is that you can take this money to another job without paying taxes on it as long as you transfer it to another job or private 501k. The third benefit is that it's automatic, you don't miss it because you never received it in your checking account. This is known as living within your means. The fourth benefit is the gratification that you are in control of your future. JRL/mpa Good luck and get saving (now).
I'm almost seventy years old. I worked for a company with a company sponsored retirement plan ( they paid into it - I did not), they also had a 401(k) plan with a matching contribution up to 4% to which I contributed the maximum allowed by law, and of course a government sponsored retirement (Social Security for most - but in my case it was railroad retirement).
In retirement, I take home each month pretty much what I did when I was working, I have a supplemental health plan which, and,with Medicare pays 99% of my healthcare costs and I retired at 60 years old. Ten years later, I have yet to dip into my savings principal.
Over that ten years I have traveled the world, started a company and done many of the things I didn't have time to when I was working. Our home(s) are paid for, we have no bills other than monthly expenses and it never would have been possible without that retirement plan. That's why it's great!
Their are are few plans so generous today. That plan helped keep stay me with that company for thirty years. I started on the bottom and worked my way up......and, lots of the upper jobs still have great benefits.....for those they can't do without. If you want that security tomorrow, make sure you're one of those people today.
When looking for a job, you need to consider the value of the benefits being provided in addition to the salary. Don is right on the mark, and he took full advantage of his company's benefits and matching 401K program. Not too many companies still have a traditional pension, but if they do, there is a lot of value in that. I also work for a company that offers a matching 401k (6%) and I was grandfathered into a traditional pension and also hope to retire early. If you aren't disciplined starting right out of college, that will be hard to do.
While retirement probably seems a long way out, and it might be for you, it is something to be planned for and actively managed. A few generations ago, for many Americans, there was no such thing as true “retirement”, but with the advent of the social safety net via social security, retirement became a real possibility for my parents and their generation. However, with the shrinking numbers of working Americans, and increasing numbers of retirees, we can be fairly confident that social security benefits will shrink, and the full retirement age will continue to creep up. When I started working, full retirement age was 65, and it’s now 67, and very likely to increase again in your life time.
This is where company-sponsored retirement plans come in. These are called 401k's, 403b’s and 457’s and they are a good ways to save for your retirement. They are good because money can often be invested pretax (lowering your taxes today) or via a Roth contribution, where you pay taxes now, but not when the money is distributed making withdrawals “tax-free”. With a matching employer plan, it could mean the difference between a comfortable retirement, and having to significantly change your standard of living. With my first employer, for every dollar I put in the plan, my employer matched that amount 100% in their stock up to 8% of my salary and that was an amazing plan even at the time. You probably won’t find anything that good today, but getting started is the most important thing.
Because of decisions like before tax, pre tax and Roth, it is important that you take advantage of any free financial advice services that come along with the plan. (Most plans do) Once you are in a plan, the very next and important question is what you should be investing in. Stock, bond s etc. You want to learn the basics of investing for retirement so you can make your best choices!
Good luck to you!
I am glad you are thinking about retirement savings. It is always good to start early and insure your future :)
Most companies do match employee's 401k savings up to a certain amount and these are important benefits to keep in mind while choosing companies to work for.
A company sponsored retirement plan is a very good way to start savings for retirement in as painless and simple a way possible. When just starting your career even a small contribution (often matched by the company) will lead to significant savings benefits in thirty to forty years. The old rule of thumb that you double your money every seven years may not be as accurate as it once was, but it is still a good measuring stick to understand the impact time and appreciation can have on a small contribution. $1,000 in your first year - which is less than $50 a paycheck without a company match - will multiply nearly 6 times over the course of a typical career. and that is at a very conservative 5% return
In my experience this is preferable because often your employer will pay a contribution to your retirement fund if you enroll in their plan.
Take advantage if your company matches your 401k contributions. Like Greg said there are different options when it comes to your 401k. Traditional and Roth are the ones I currently have. You'd have to decide what best fits your budget, getting taxed now or getting taxed at retirement? If you plan on being in a higher tax bracket once you retire then it might be a better idea to go with the Roth 401K. Being taxed now will be less than being taxed later. Peter Lynch is a great source to check out as far as personal finances goes. One other advantage of having a 401k is that you can borrow money from yourself if your going to buy a house. The interest you'd be paying back would be to yourself. When making your 401k selections make sure you check the fees they charge to manage your money. The fees can add up over the course of your career.