Make Your Plan Work for You

Once you choose a contribution amount, this money is automatically deducted and deposited into your retirement savings plan account. It’s that easy. So paycheck after paycheck, you build your nest egg without lifting a finger. You can’t forget to save for retirement, because it’s automatic!

Automatic set-it-and-forget-it paycheck deductions ensure you make equal investments in the same investment options over and over again. That means you’ll buy more investments when the market is low and less investments when the market is high. Also known as dollar cost averaging, this can help reduce the risk of purchasing an investment at its price peak.

If you ever leave your current employer, your vested retirement savings plan account balance is completely portable. If you choose to move your account balance into an IRA or your next employer’s retirement savings plan, all the tax benefits are preserved!

Every dollar you contribute to your retirement savings plan is deducted directly from your salary before taxes are taken out. This reduces your net taxable income, resulting in a lower overall tax liability. Let's look at an example.

Assume that Mary and Dave each save $500 per month. Each of them earns the same salary and is in the same tax bracket. The only difference is that Mary saves using her retirement savings plan, while Dave saves using a standard brokerage account. With her employer-sponsored savings plan, Mary is investing with pre-tax dollars, and pays taxes on less of her paycheck. However, Dave has to pay taxes on his entire paycheck, including the $500 he puts in his brokerage account.

The result? Mary takes home $125 more from each monthly paycheck than Dave does.

	Mary	Dave
Gross Income per paycheck	$5000	$5000
401(k) contribution	- $500	-      $0
Paycheck Amount (taxable income)	$4500	$5000
Tax (assuming 25% taxes)	- $1125	- $1250
Take Home Pay	$3375	$3750
After-Tax Savings	-      $0	- $500
Effective Take Home Pay	$3375	$3250

Once your money is in your employer-sponsored retirement savings plan, your investments also grow tax-deferred! This means your earnings will not be taxed until you actually withdraw the money. When you use other savings devices, each realized gain is subject to taxation, reducing the number of dollars you have working to produce your nest egg.

By taking advantage of her employer-sponsored retirement savings plan, Mary’s $500 monthly investment grows faster than Dave’s identical monthly investment to a standard brokerage account.

These tables are intended as educational tools only. Calculations are estimates and may not provide accurate projections. Your actual circumstances, including current income or retirement needs, may vary.