Employee Retirement Plans

Employee Retirement Plans

Employer 401k Plans & Options

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According to the UC Berkeley Center for Labor Research and Education, the median balance among the 401K account holders in the US is less than $20,000. And only 50% of workers have been provided with a defined contribution plan from their employer, with only 30% of employees making regular contributions.

Why employees may not contribute to an employer 401K

401K Plans

Today, the richest 20% of Americans hold roughly 70% of IRA and 401K accounts. One of the most common reasons that employees neglect to contribute to an employer 401K is because of a simple lack of knowledge.

The average employee may not fully understand the benefits available to them in a 401K retirement account. Even more confusing is the fact that employer 401K plans are constantly changing, muddying the waters when it comes to when and how much an employee should contribute toward his or her nest egg.

What businesses need to know about employer 401K plans

Employer 401K plans provide several options for employees to invest for their retirement, including stocks, mutual funds, bonds, and treasury bills. Depending on the provider, they may only have a select group of funds to choose from or a wider database of investment options.

If your business provides an employer 401K plan to your staff, employees should be encouraged to contribute as soon as possible. The earlier that employees contribute to retirement, the more that money can grow through investments. Even if an employee can only contribute as little as 2%, it’s enough to make a difference in the long run.

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