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.
