401(k) School
What's a 401(k)?
A 401(k) is a savings account that allows you to save for retirement, tax-deferred, without thinking too much about it.
Employers and their employees designate how much they want to save per paycheck and it's taken out automatically — pre-tax.
What are the benefits?
Among the many benefits of establishing a 401(k) plan for a small business:
- Reduce taxable income for employers
- Defer taxes for employees
- No match required
- Safe haven for assets
Where will people be getting their retirement income?
It may surprise you, but many of today's retirees are not receiving their income from Social Security. In fact, the majority of retirees are receiving only 42% of their total retirement income from Social Security and retirement savings.
Some experts estimate that Social Security will run out of money by the year 2030. The majority of their income is coming from earned income. This might be from a part-time job or personal savings and investments.
The pie chart below shows you where many of today's retirees are receiving their income. You may be shocked to discover that even today, many retirees are receiving only 42% of their total retirement income from Social Security and retirement savings. The majority of their income is coming from earned income such as a part-time job, and personal savings and investments.
What is the demand for 401(k)?
In a recent survey, employees ranked retirement plans as one of the most popular benefits, second only to healthcare.
Another survey of small business owners reports that:
- 67% of small business owners believed they would, or could, run out of money in their lifetime
- 40% said that they were reconsidering the timing of their retirement
- 85% are delaying their retirement date to save more
Currently, however, seven out of ten companies with fewer than 50 employees do not have a 401(k) plan.
