Have you heard? It’s National Retirement Security Week (NRSW) and ADMIN Partners is celebrating this national event by spending the week promoting the benefits of saving for your future retirement. Each year, the NRSW is an opportunity for those working in financial services to bring awareness to others about the importance behind planning for a comfortable retirement. To do this, ADMIN will be sharing six different reasons that you should be utilizing your employer sponsored retirement plan.
In Part Two we examine the return on investment in a retirement plan versus a savings account, the contribution limits offered in an IRA as well as those in a retirement plan and the various investment options one might have available in an employer sponsored plan.
Higher Contribution Limits
As people start to consider saving for their future, they often find themselves overwhelmed by the options that are available to them. From the various forms of Individual Retirement Accounts (IRA) to Health Savings Accounts, it can be a convoluted process trying to navigate which option is best for you. Yes, these types of retirement plans can be beneficial, but they can also be limiting when it comes to the amount you are able to save into the plan each year.
Each year the IRS mandates contribution limits for all types of plans, but the limits are vastly higher within an employer-sponsored retirement plan than most other options. (For example: In 2019 the limit for 401(k), 403(b) and most 457 plans is $19,000/annually while IRA’s limit you to just $6,000/annually.) This is why we encourage you to start contributing to your employer’s Plan as early as possible.
A Better Return On Investment (ROI)
Another way that retirement plans sponsored by an employer beat out the average savings account is the return on your investment. While most savings accounts offer interest rates, they rarely benefit individuals as much as the growth that happens on investments within the stock market over time. People who contribute to a retirement plan early in their career (and limit their withdrawals until retirement) on average make greater returns on their savings. It is also because of these returns that you typically have to invest less money than you would have to save in a traditional retirement plan.
(Bonus Money: If you remember from part one, you can also build returns on the employer match money that is offered by some organizations when you contribute!)
A Variety of Investment Options
When it comes to retirement plans, there are different investment options offered within each of the different plan types. This is especially the case for 403(b) and 457(b) plans with the most common options being annuities and mutual funds. Both options come with their pro and cons, but the choice allows participants within the retirement plan to find the investment that works best for them and their financial future.
Click here to learn more about the various investment options offered in 403(b) and 457(b) plans.
Thanks for joining us as we celebrate National Retirement Security Week. Be sure to check our Part One of our series here and contact us with any questions you may have.