Finding the money to invest for retirement is never easy. By the time that the mortgage is paid, property taxes withdrawn, groceries purchased, house heated (or cooled) and kids clothed there is never much left in the bank account to even consider investing with.
However, for a large portion of the population who are fortunate to have full time jobs, there is an easy way. Or at least put some money away for retirement. Unfortunately, not everyone takes full advantage of these plans and that is money that can never be found again.
Many organizations offer what is called employer-sponsored savings plans, or simply employee savings plans. These plans are offered to employees as a way to set aside money from their wages. This is in order to save for longer term goals like retirement, purchasing a home or even college for the kids. The process is automatic. Each time the employee gets his or her salary, money will be transfer to the savings plan.
The plus side to a number of these plans is that the employees’ contributions are often match by the employer. Of course this is up to some set maximum. For example, for many employee savings plan, if the employee contributes 5% of their earnings to the savings plan the company will contribute an additional 5%. That is like getting free money.
Two Examples of Employer Sponsored Plans
Depending on the company you work for, there are a number of different types of employee savings plans that can be offered. Here are the most common ones that you should definitely consider maxing out. Especially if your employee provides a matching contribution. That will be very important to the long term growth of your portfolio.
The 401(k) is a retirement account by the federal government that is tax advantage. That means that the money is able to grow tax free within the account. Over time this can make a massive difference to what your account can grow to.
Many 401(k) plans through a company offer an employer match. Make sure that you research how that match works. Then you should try your best to contribute at least to that maximum matching level.
Employee Stock Ownership Plans
Another common option that employers offer employees is an employee stock ownership plan (ESOP). They are also commonly refer to as employee stock purchase plans (ESPP).
This is available to companies whose shares trade on the stock market. Employees are able to purchase shares in the company using payroll deductions. In other words, shares of the company the employee works for are purchased using wages. Over time these purchases can add up to be substantial sums of money, especially if the company experiences solid share price appreciation.
In addition, a key benefit to an ESOP or ESPP is that the company either matches dollar for dollar the investment in company shares with more shares. Or they offer a discount to the share price. Either way, the employee sees huge benefits with the additional money provide by the company.
Investigate Your Employer’s Plans and Max Out
As discussed, an easy way to maximize how much you save for retirement, even if you are short on funds after all expenses are pay. If to maximize your enrollment in the various types of employer sponsored savings plan. The first key benefit is the forced savings as every time you get paid money is automatically deducted. It is then place into the savings account. If you invest in this manner, you will more than likely find that you hardly miss that money at all.
The second key benefit is that many times these employer-sponsored savings plans include some sort of matching component that rewards you for savings. For example, if your company has a 401(k) plan they may also match any contributions made by you into the plan with more savings contributed by the company. This free money can add up to huge dollars over time.
Your next step should be to reach out to your company’s HR department. Why? To find out more about the savings plan. This way you will be able to find out what they offer and sign up for the maximum you can.
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