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Opening a 401(k) provides tax benefits to the employer and employees Thumbnail

Opening a 401(k) provides tax benefits to the employer and employees

Business benefits

  • Employer contributions are tax-deductible.
  • Assets in the plan grow tax-free.
  • Plan options are flexible.
  • Tax credits and other benefits for starting a plan may help reduce costs.
  • Retirement plans can attract and keep better employees, which reduces new employee training costs.

Employee benefits

  • Employee contributions can reduce current taxable income.
  • Contributions and investment gains are not taxed until distributed.
  • Contributions are easy to make through payroll deductions.
  • Interest accrues over time, which allows small, regular contributions to grow to significant retirement savings.
  • Retirement assets can be carried from one employer to another.
  • The saver's credit may be available to some employees.
  • Employees can improve financial security in retirement.
Source: https://www.irs.gov/retirement-plans/plan-sponsor/benefits-of-setting-up-a-retirement-plan

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