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Employer Sponsored Retirement Programs
Offering an employer sponsored retirement program is a benefit that
companies use to attract and retain good talent – like you! Keep in
mind that not all plans are created equal. Find out if your company
offers a matching program. If they do, this means that for every dollar
you invest in retirement, your company will match up to a certain
percentage. For example, many companies will match 100% of your
contribution up to 3% of your salary. So if your salary is $50,000, and you
invest $5,000 a year into your retirement plan, the company will match
an additional 3%, or $1,500. This is essentially “free money,” so it makes
perfect sense to take advantage of it.
By far, the most popular employer sponsored retirement program is the
401K. A 401k plan is tax-deferred, so it comes with great tax benefits.
The amount you choose to contribute is deducted from your paycheck
pre-tax, which reduces your taxable income. This not only reduces the
tax taken out of every paycheck, but also reduces your taxable income
at the end of the year.
Money you contribute to your 401k will be invested in
investment engines, such as stocks, bonds,
mutual funds, and money market
accounts. This is called your “portfolio.”
Your employer will have you meet with
their advisor to determine if you want a
high-risk, medium-risk or low risk
portfolio. Typically, younger employees
choose higher risk portfolios since they
have a long time until
retirement, whereas older
workers are more
conservative. Your
financial
representative will
help you select a
risk level that is
appropriate
for you.
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Section 18 – Planning For Your Future