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The common saying is that it’s never too late to start saving for retirement. And while that’s absolutely true, the flipside is true as well: It’s never too early. Getting a jump-start on your retirement is a big step toward financial confidence.

There are a lot of savings vehicles that can help you on your path to retirement, no matter how far off that may seem. You’ve probably heard of a 401(k) or 403(b), or maybe you are already participating in one. If your employer sponsors such a retirement program and you haven’t signed up yet, here are some of the benefits you may want to explore.

Why use an employer-sponsored plan?

A 401(k) is an employer-sponsored retirement plan into which you could contribute a percentage of your paycheck. Unlike savings accounts, for instance, 401(k)s allow you to select from a variety of investments provided under the plan.1

There are many benefits to using a 401(k). For example, you can choose the percentage you’d like to contribute, which helps you stay in control of your savings strategy. In addition, the amount is deducted from every paycheck before you even see it—a fairly painless way to save.

Because you can contribute to your 401(k) account pretax, your taxable income is lower. This does mean that your withdrawals will be taxed in retirement, but if you have planned accordingly, you probably won’t be working at that point, or at least not as much as you are now, and so you’ll likely be in a lower tax bracket, anyway.2

The biggest advantage to a 401(k) is that it can be employer-matched. This means that if you contribute a certain percentage of your paycheck to your 401(k), and your company matches, then contributions you make up to that set amount will be matched by the company. Yes, it’s exactly what it sounds like—free money! Similar options may be available with a 403(b).

Challenge: There are many ways to secure money for your retirement. Don’t hesitate to speak to your human resources representative about your employer’s 401(k) options, and get started on yours right away.

Now, it’s not a hard-and-fast rule that companies match your entire contribution. For example, your company may offer to match 50 percent of your contribution up to 6 percent (or less) of your paycheck. So, if you earn $45,000 per year and put 6 percent toward your 401(k), you would be saving $2,700 each year in your 401(k). By matching at 50 percent, your employer would be adding $1,350 into your account each year.2 Not bad, right?

The bottom line is that while retirement might seem far off, taking advantage of a 401(k) as soon as possible is still a win-win. If you are lucky enough to work for a company that contributes in any way to your 401(k) plan, then take advantage of that offer, and do it immediately. The earlier you start, the more money you will build up.

There are other options

If you aren’t part of a company that offers a 401(k), have no fear. There are many retirement vehicles that work well for people who are freelancing or just starting a company of their own, for example. It just means you will have to be the one to kick the process into gear.

Look into an IRA (individual retirement account), which allows you to save at your own pace in a tax-advantaged account. The two most common types of IRAs—traditional and Roth—are set up so that once your money has been deposited, there are no taxes on the gains that the investment earns.3 And while IRAs are common, there are many avenues you can take with them, so consider reaching out to an advisor who knows the ropes.

The path to retirement doesn’t start late in life; it starts now. In fact, it has already begun. So make the most of yours.

3 Key Takeaways
  1. Participating in an employer-matched 401(k) is like getting free money!
  2. You can choose the percentage you’d like to contribute to a 401(k), which helps you stay in control of your savings strategy.
  3. 401(k) accounts aren’t the only option. IRAs are great options for retirement savings as well.



Challenge yourself

Understanding different retirement vehicles is a solid step in the right direction. Keep reading: Learn the additional investment tactics that will benefit you long term.


1 “Definitions” page, August 2017, Internal Revenue Service

2 “Understanding 401(k)s and All Their Benefits,” October 2016, Investopedia

3 “IRAs: Advantages, Disadvantages and Which One is Right for You,” December 2015, Investopedia

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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