Even though you might have heard of a 401(k) retirement savings account, you might have never really thought about opening one. If you're a younger adult, for example, you might have a hard time thinking about retirement when it feels so far away. Even if you are an older worker, you might have trouble making ends meet as it is, so you might not feel as if you can actually afford to contribute to one of these accounts. However, if you can, you should definitely consider opening a 401(k) account. These are some of the top benefits of doing so.
1. Your Employer Might Help
Obviously, this is not an option for everyone. However, many companies do offer employer matching to 401(k) contributions up to a certain amount. This means that you can literally get "free" money from your employer just for putting money in your account. It's kind of like getting a raise, except you are deferring the money so that you can enjoy it in the future rather than getting it on your weekly paycheck right now.
2. There Are Tax Benefits
Another great thing about a 401(k) account is the fact that it can save you a lot of money in taxes. If you are like a lot of people, you might not be too happy about the amount of money that is taken out of your paycheck each pay period for taxes. One good way to hold on to more of your money and to pay less in taxes is to contribute to your 401(k) account, since this can help reduce the amount of taxable income that you make, thus reducing the amount that you pay in taxes. Basically, you can choose to put a little bit of your money in your retirement account versus paying it out to Uncle Sam.
3. You Can Save for the Future
Even though retirement might feel like it is a long way away right now, it can creep up on you quickly without you even realizing it. If you wait until you think that you have extra money to put toward your future, it might be too late. If you start saving now, however, you will have more time to save for the future, and you can earn more in interest over the years as well.
As you can see, having a 401(k) account is a smart move for any working professional. These are just a few of many reasons why you should consider opening one of these accounts. For more information, talk to a financial planner like those at Gosho Financial Group.