Adam and Hanneh cover some common employer-sponsored retirement plans, like 401(k)s. Plus, they teach us about other options like IRAs and Roth IRAs.

Looking for more? Check these out:
Retirement calculator —
IRA vs. 401(k): Which is better? —
2022 Best Places to Retire list —
Download the retirement timeline —

▬ CONNECT ▬
Subscribe to our channel and also find us at:
Facebook:
Instagram:
Twitter:
TikTok:

Money is different for everyone, and what works for other people may not work for you. We’re here to give guidance, not personalized financial advice, so please do your research to find what’s right for you. The content of this video is accurate as of the publish date….(read more)

LEARN MORE ABOUT: Qualified Retirement Plans

REVEALED: How To Invest During Inflation

HOW TO INVEST IN GOLD: Gold IRA Investing

HOW TO INVEST IN SILVER: Silver IRA Investing

Bankrate Basics | Retirement | Lesson 2: Employer-sponsored retirement plans

When it comes to saving for retirement, employer-sponsored retirement plans are a valuable tool that can help you build a nest egg for the future. These plans are offered by many employers as a way to help their employees save for retirement in a tax-advantaged manner. In this lesson, we will explore the basics of employer-sponsored retirement plans and how they can help you achieve your retirement goals.

Types of employer-sponsored retirement plans

There are several types of employer-sponsored retirement plans, each with its own set of features and benefits. Some of the most common ones include:

– 401(k) plans: 401(k) plans are the most popular type of employer-sponsored retirement plans. They allow employees to contribute a portion of their pre-tax income to a retirement account, which can then be invested in a variety of options such as stocks, bonds, and mutual funds. Many employers also offer matching contributions, which can help boost your retirement savings even further.

– 403(b) plans: 403(b) plans are similar to 401(k) plans, but they are offered by certain types of employers such as non-profit organizations and schools. They also allow employees to make pre-tax contributions to a retirement account, and may also offer employer matching contributions.

– Defined benefit plans: Defined benefit plans, also known as pension plans, are less common than 401(k) and 403(b) plans. With a defined benefit plan, retirees receive a predetermined amount of income based on their salary and years of service with the employer.

– Simplified Employee Pension (SEP) plans: SEP plans are designed for self-employed individuals and small business owners. They allow employers to make tax-deductible contributions to a retirement account on behalf of their employees.

– SIMPLE IRA plans: SIMPLE IRA plans are another option for small businesses, and they allow employees to make tax-deferred contributions to a retirement account. Employers are also required to make either matching or non-elective contributions on behalf of their employees.

How employer-sponsored retirement plans work

Employer-sponsored retirement plans work by allowing you to save for retirement in a tax-advantaged manner. When you contribute to a 401(k), 403(b), SEP, or SIMPLE IRA plan, your contributions are made on a pre-tax basis, which reduces your taxable income for the year. This means that you can save for retirement while also lowering your current tax bill.

Additionally, many employer-sponsored retirement plans offer employer matching contributions, which can help boost your retirement savings even further. For example, if your employer offers a 3% match and you contribute 3% of your salary to your 401(k) plan, your employer will also contribute an additional 3% of your salary to your account. This is essentially free money that can help accelerate your retirement savings.

Another benefit of employer-sponsored retirement plans is that your contributions and investment earnings can grow tax-deferred until you withdraw the money during retirement. This can help your retirement savings grow faster and more efficiently than if you were to save in a regular taxable account.

Enrolling in an employer-sponsored retirement plan

If your employer offers a retirement plan, enrolling in it is typically a straightforward process. You will need to decide how much of your salary you want to contribute to the plan, and also select your investment options. Many plans also offer target-date funds, which automatically adjust your investment mix based on your expected retirement date.

It’s important to take advantage of your employer-sponsored retirement plan as early as possible, as the earlier you start saving for retirement, the more time your money has to grow. Even small contributions can add up over time, so it’s important not to delay enrolling in your employer-sponsored retirement plan.

In conclusion, employer-sponsored retirement plans are a valuable tool that can help you build a nest egg for the future. Whether you have access to a 401(k), 403(b), defined benefit plan, SEP, or SIMPLE IRA, taking advantage of these plans can help you save for retirement in a tax-advantaged manner and secure your financial future. If you have access to an employer-sponsored retirement plan, be sure to enroll and start saving as soon as possible.