There are plenty of good reasons to save for retirement using your employer’s 401(k) or a similar tax-deferred plan. And if you’ve attended one or more new-employee sessions during your working life, you’ve probably heard all these reasons, including:
- A 401(k) makes saving easy and almost automatic. You can pretty much set it and forget it.
- Investing in the market can sometimes be seen as a better way to grow your money in the long term rather than using a CD or savings account. (Yes, even now, as interest rates have risen.)
- If your employer matches a percentage of your contributions, you’re basically getting free money every month.
- There’s the allure of the upfront tax break: The money you save to your 401(k) comes out of your paycheck before taxes are calculated. You won’t pay taxes on your contributions or earnings until you start making withdrawals in retirement.
- Putting off paying those taxes until after you retire may make sense because you may be in a lower income tax bracket when you retire.
