David Milberg - 3 Characteristics of a Good 401(k) Plan

3 Characteristics of a Good 401(k) Plan

3 CHARACTERISTICS OF A GOOD 401(K) PLAN by David MilbergIn today’s wild world of economics, retirement savings are becoming rare. As Social Security and other pension programs continue to be in peril, more and more employees are realizing the important role their 401(k) plan will play in having a financially secure retirement. However, while many workers have a 401(k) plan as part of their benefits package, they often know little if anything about how to make these benefits work to their advantage. If you find yourself nearing retirement or in its early planning stages, here are three characteristics to look for when seeking a good 401(k) plan.

3 Characteristics of a Good 401(k) Plan David Milberg

Matching Contributions

When seeking a good 401(k) plan, always be sure to see if it comes with a matching contribution from the employer. Even though fewer employers are offering this to employees, it’s estimated that 85 percent of employers still provide a matching contribution. Most plans provide a matching contribution of 50 cents for each dollar saved, up to a maximum of six percent of an employee’s annual salary. To get the maximum possible match, most employers require workers to save between four and six percent of their pay.

Immediate Eligibility

To enjoy the maximum savings from your 401(k) plan, it’s best to be eligible to participate from your first day of employment. However, a recent survey showed only 52 percent of employers offer new employees immediate participation in their plans. In today’s wild world of economics, retirement savings are becoming rare. As Social Security and other pension programs continue to be in peril, more and more employees are realizing the important role their 401(k) plan will play in having a financially secure retirement. However, while many workers have a 401(k) plan as part of their benefits package, they often know little if anything about how to make these benefits work to their advantage.

 Catch-Up Contributions

If you happen to be an employee who is age 50 or older who needs to catch up on retirement savings, some 401(k) plans allow you to do just that. In fact, while 96 percent of plans offer this option, only about 13 percent of eligible employees take advantage of this valuable opportunity. However, for those who do, they can contribute as much as $22,000 per year.

By knowing what characteristics to look for in a good 401(k) plan, chances are you’ll be able to take full advantage of whatever retirement benefits your employer may offer. Whether it’s immediate eligibility or matching contributions, be sure to take advantage of any and all opportunities your employer may offer.

With many employers, new employees must wait up to three months to participate, and in some cases up to one year before being eligible. And if you do find a plan that offers immediate eligibility, try to make sure it also include the matching contribution.

David Milberg is a financial expert in NYC  with nearly 3 decades of experience in the finance industry. He is a long-time owner of Milberg Factors, a factoring and finance company with locations in New York, California, and North Carolina.