Employee Education: Class 100 – “How Can a 401(k) Benefit Me?”

A 401(k) is a retirement savings vehicle. It provides its users a means to invest for retirement with significant advantages in taxation so long as it’s utilized for retirement. It derived its name from the section and paragraph of the IRS code it appeared in; section 401, paragraph (k). That said, defining a 401(k) doesn’t mean a lot to most people. The true nature of a 401(k) is much simpler. To know what a 401(k) really is, simply look at its purpose.

The 401(k) was designed to help answer a question. That question is, “When you want to stop working, what is going to keep on working so that you don’t have to?” Thus, the purpose of a 401(k) is to help you to continue to have a paycheck after you stop working so that you can pursue a comfortable retirement of life and leisure.

The main benefits of a 401(k) are in its innate tax advantages, simplicity in use, and, oftentimes, the company matching it receives. These factors come together to allow the 401(k) to make it significantly easier for you to pursue a comfortable retirement of life and leisure.

To get this benefit though, you and your 401(k) will have to work together, and, we do mean work. The 401(k) will do the heavy lifting, but you have to have the discipline to give your 401(k) the resources it needs to potentially grow. This is expounded upon in our next class, Class 101 – “How Much Should I Contribute to My 401(k)?”.

The purpose of a 401(k) is to help you to continue to have a paycheck after you stop working so that you can pursue a comfortable retirement of life and leisure.