A day to celebrate 401(k)!

September 10th, 2021 is National 401(k) Day!

Started by the Plan Sponsor Council of America (PSCA), National 401(k) Day is a holiday dedicated to promoting retirement plan savings education. It’s a day for employers and plan sponsors to provide information to employees on the importance of planning and saving for retirement and how to do it.

With recent studies showing that only 22% of Americans are financially prepared for retirement, now is a great time for both employers and employees to start investing in the future. Let’s take a look at some of the ways that these plans can benefit everyone.

If you’re an employee not currently participating a 401(k)…

What are you waiting for?

A 401(k) plan allows you to deposit money from your paycheck into a tax-free retirement account. This not only helps you down the road, it also helps you right now. By setting aside funds, you’re reducing your taxable income. That means that Uncle Sam gets less of your hard-earned money up-front. You won’t pay any taxes until you withdraw your funds at retirement.

Participating in your company’s 401(k) plan is also extremely convenient. When you decide to enroll, you’ll need to determine how much you want to set aside each pay period. Once the contributions are set up, they’ll be automatically deducted from your paycheck and deposited into your 401(k) account. Easy!

Money set aside in your retirement account is invested, allowing it to grow, build, and create wealth over time. The table below provides an example of how your retirement plan can compound your small investments into a large sum. Time is an important factor though. The earlier you start saving, the more compounding can benefit you!

401(k) Compounding

If you’re an employee currently participating in a 401(k)…

Congratulations on investing in yourself!

We applaud you on taking steps towards securing your financial future in retirement. While you’re on the right path, make sure not to lose sight of your end goal. Market volatility and changes to your personal situation can affect even the best laid plans. It’s important to reevaluate your retirement plan at least once each year to ensure you’re maximizing your savings potential.

Here are a few recommendations for your annual 401(k) review:

Evaluate Your Retirement Plan Goals – For some, sipping mai tais on a tropical beach is the perfect retirement; while for others, it’s spending more quality time with grandkids. Whatever your dream may look like, it’s important to plan accordingly. Make sure that what you’re setting aside now will allow you to enjoy the things you want later.
Give Your Account a “Health Check” – So you know what you want, now you need to make sure you’re getting there. Check that the amount you’re saving and investing is on pace with what you think you’ll need in retirement. If not, try to determine why. Is it because your retirement budget has increased? Or maybe you haven’t increased or maximized your contributions? If you’re having trouble, a Financial Advisor can help you diagnose and treat minor issues before they can turn into major problems.
Designate Your Beneficiaries – The main focus of 401(k) Day in 2020 is highlighting the importance of designating or updating your plan beneficiaries. Who inherits an asset like a 401(k) is a critical detail and is often looked at once and forgotten. Make sure to stay on top of the names on the dotted line. Click here to learn more from the PSCA about this crucial step in the retirement plan process.
Stay Current on Plan Changes – Has your retirement plan added new investment options, new plan features, or new contribution limits? Each year, changes in applicable law or plan sponsor choices can affect your 401(k). Make sure to read up on any notifications you receive regarding changes to the plan or your account so you can take advantage of all the benefits being offered to you.

If you’re an employer…

Thank you for providing your employees with a path to financial security in retirement!

Offering a 401(k) plan not only benefits your employees, it can also benefit your company. Today’s labor market is highly-competitive, and offering the right benefits can give you a significant advantage in your recruitment and retention efforts. As one of the most consistently sought-after perks, a retirement plan can give you a leg-up in attracting and retaining top talent.

Your retirement plan can also provide certain tax advantages to your company. If you’re offering a 401(k) for the first time, you may qualify for a tax credit of up to $500 for the first three years of the plan. Some of the administrative fees associated with the plan may also be considered a tax-deductible business expense. And for those employers offering contributions to their employees’ plans, these are exempt from federal, state, and payroll taxes if they fall under 25% of the total compensation paid to eligible employees participating in the plan.

The future is looking very bright!

Whether you’re an employee looking to enroll for the first time, a seasoned retirement account veteran, or an employer offering this valuable benefit, a 401(k) is a great way to invest in yourself, your employees, and your future. Celebrate National 401(k) Day by starting, securing, or encouraging a financially-secure retirement! What are you waiting for? Get started!

Sheakley Retirement provides individual retirement account support for small to medium-sized employers. If you’re looking to offer a new 401(k) plan to your employees or transfer administration of an existing account, contact our experts today.

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