Advantages and Disadvantages: 401k Plan to the Employer and Employee

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Advantages and Disadvantages: 401k plan to the Employer and Employee A 401(k) plan is a retirement account to which employee and employers contribute, on which taxes are deferred until withdrawal, and for which the employee selects the types of investments. As with anything to do with the Internal Revenue Service, the 401(k) plan has many ups and downs and many regulations that must be followed. This makes things more difficult for both the employer and employee in making decisions about the plan. We have taken a look at the advantages and disadvantages of the plan from both sides of the table to show what all is involved in deciding to use a 401(k) plan. First, we take a look at the advantages to the employers to see if it is worth it…show more content…
IRAs, 401(k),s 403(b),s and other employer-sponsored plans are all considered tax-advantaged by the Internal Revenue Service. All contributions grow tax-deferred until they are withdrawn, which means that money will grow faster than in a currently taxable investment earning the same rate of return. If you need your retirement assets now, and are prepared to pay the tax bill that result 's, you may ask your employer to pay them to you in a check. However, before you do ask for a check, you may want to compare the impact of paying taxes today versus continuing to defer taxes (www.psca.org) Automatic payroll deductions make it easy to build a retirement nest egg with affordable deductions. 401(k)s make saving convenient because the money comes directly out of your paycheck before you ever see it. This helps you make saving a priority. Also you do not see the money so you are not tempted to spend it. If you make bad choices when compared to the competition, you make yourself less attractive to potential talent. Record keeping can be a very big disadvantage to an employer offering the 401(k) plan. The cost can become very high and requires the organization to hire new employees to handle this job, not to mention that if they mess up somewhere it could cause many problems. They might lose some of the employee’s money, or give them more than they should have. The problems that could occur are

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