Why are Employees Saying No to Free Money?

Did the above title get your attention? If not, then you should take note anyway because you are likely losing out on free money that your employer is offering. This free money does not go to just one top employee or to those that have been with the company the longest. This kind of free money is open to everyone employed by a business that offers the advantage of employee savings plans, 401(k)s and other financial vehicles that reward saving. If you are fortunate enough to work for a company that does this for its employees, you must take advantage of it. Because more and more businesses are opting to drop these types of programs, it is in your best interest to jump on the free money bandwagon sooner rather than later. 

Employee Savings Plans

The beauty of employee savings plans is two-fold. First, these plans allow you to invest pretax money into what is essentially a pooled account. While many people buy into these types of plans in an effort to get a solid retirement, others choose different long term goals. These could be as diverse as purchasing your first home to paying for your child's college tuition. The second beautiful thing that comes built into these plans is that employers will often match your investment. This free money does come with some stipulations. The amount of your employer's match can vary widely from a certain percentage or a particular dollar amount. While you are entitled to receive all of your contributions should you leave the company, most businesses require that you remain with them for a certain amount of time before you can withdraw their portion of the investment. 

401(k) Retirement Plans

You are likely already familiar with 401(k) plans if your employer offers this benefit to you. What is also likely is that you are not taking full advantage of the opportunity to have free money for your retirement. Most employers contribute money to their employee's 401(k) up to a certain percentage of their annual salary.  The key to tapping into this potentially lucrative method of getting free money is to simply contribute the maximum amount that ensures that your employer's match does not phase out. One important difference to note is that a 401(k) plan can only be used for your retirement. This is not such a bad thing, though, as the American people are notoriously unprepared when it comes paying for their retirement. That, however, is a story for another day.

Your employer might offer you something else besides the above-mentioned investment programs. Check with your human resources team to determine which savings plans are available to you. If you want a concrete way of determining your potential earnings should you decide to take advantage of one -- or all -- of these plans, check out this Bloomberg Business financial calculator. Even though this interactive tool states that it is used for calculating those earnings from a 401(k) plan, you can use it to manipulate the figures and find out how much other types of plans could be worth.

TheMoneyShelf.com


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