Retirement plans.

Author:Gembis, Jeffrey

If your company, has a self-directed retirement plan, such as a 401 (k) or SIMPLE, you're offering your employees significant control over their future. Participation in such a plan can make retirement preparation easier and more effective in the following ways:

* Money is taken out of participants' paychecks systematically. It's much easier to save money when you don't have the opportunity to spend it first.

* Regular investing is automatic. When investment purchases are evenly spread throughout the year, participants can acquire more shares when the cost per share is down and fewer shares when the cost is up. As a result, the average cost per share is likely to be lower than if all shares are bought at the same time. Of course, periodic investment plans do not guarantee a profit or protect against a loss in declining markets. Also, as these plans involve continuous investment, you must be willing to continue your investments during periods of low price levels.

* The investment menu encourages diversification. A broad selection of options makes it easy for participants to allocate their funds among a variety of investment types. This diversification can decrease account volatility by having losses suffered by one investment offset by potential gains achieved by another.

* The government is helping. The tax advantages of a qualified retirement plan save you money now and help assets grow more quickly. With pretax paycheck deductions, reportable taxable income is lower. In addition, the money you invest, the appreciation and the interest and dividends earned are invested and reinvested on a tax-deferred basis. Tax-deferred compounding can dramatically increase the value of a retirement account.

* The company may be helping. If your business offers matching or incentive employer contributions, this could significantly increase participants' returns and asset levels.

For all of these reasons, you should encourage your employees, particularly those who are older and may be feeling inadequately prepared, to maximize participation in your company retirement...

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