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With a 401(k) Plan, You Could Earn Twice As Much Compared to an IRA

401(k) Plans Financial Planning

Key Takeaways

  • If your employer offers matching contributions, it could double your retirement savings.
  • The employer match alone could amount to thousands in additional savings.

Why choose to offer a 401(k) over an IRA? Simple: "over time, the employer match alone could amount to hundreds of thousands of dollars."

If you have a 401(k) with your company, and your plan offers matching contributions from your employer, your employees could double their retirement savings, compared to those who only contribute to an IRA.

The Motley Fool article outlines a practical example as to how this small perk can drastically put you in a better position upon your retirement: "the median salary among U.S. workers is around $55,000 per year, and the average company match is 3.5% of an employee's wages, according to the Bureau of Labor Statistics. That amounts to an employer match of $1,925 per year."

Calculate that amount, with the average 8% return on investments: in 20 years the employer contributions alone amount to $88,000, in 30 years it would be as much as $140,000... and that is JUST in employer contributions to your 401(k).

Sure the state IRA programs are "easy" and "free" (to the employers), but employer contributions to their employees' 401(k) plans are tax deductible, improve employee retention, allow for more freedom in plan design and investment options, and are objectively the better investment vehicle to save for retirement. Although we recommend utilizing both a 401(k) and an IRA. The type of account you choose to save with, is simply the vessel, how you utilize the account is how you will successfully complete your financial goals.

For more information as to how to choose the best option for your company:

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