Should You Join Your Company’s 401k Plan

YES!  “Seven days a week and twice on Sunday,” as the saying goes.  Besides joining for the obvious reason that you will need money to take care of yourself when you get older, you also receive a huge financial reward NOW!

Here’s how it works…Let’s assume you are a single person making $30,000 of taxable income.  Under 2016 rates you pay $4,036 in federal income tax.  If you had joined the 401k plan and put in $2,000, you would deduct that from your income resulting in a tax bill of $3,736 – a savings of $300!

Three hundred dollars may not sound like a lot, until we put it in context.  For starters, you did a smart and savvy thing by saving money and you should be applauded.  And from an investor’s perspective, you hit it out of the park!  You achieved $2,000 in savings, yet you only saved a net $1,700 to get there because you received an additional $300 back on your taxes.  This equates to an IMMEDIATE return of 17.64% in your 401k account.  How good is 17.64%?  Let’s just say EPIC!  If you average 9% annual investment returns over your lifetime, you will have done extremely well.  You nearly double that return every time you add money to your 401k account.

No matter your previous experience with personal finance, your employer has made it possible for you to become an INVESTOR.  This is something you can be very proud of.  Most working Americans do not have access to a 401k plan and will never become investors, because the opportunity will never present itself like it has for you.

I am thankful you work for a company that cares enough about their employees to have a 401k plan.  Join the plan and save as much money as you can.  This is YOUR life and nobody is going to take care of you when you get older.  You’ll have to do this for yourself!

Author: Michael Marini

Michael J. Marini is President & Financial Adviser at Orlando 401k Specialists.