Retirement Income Employee Retirement Income

Working For Your Retirement: Employee Retirement Income

In order for an individual to realize their successful retirement plans it is important that they plan ahead. One of the major components of a good pre-retirement plan is to make sure that one will have an adequate amount of money available and that their savings stream is diverse.

This is important because a successful financial retirement plan will provide the necessary income needed to meet the ongoing monthly expenses. In addition, a well thought out plan will provide for unexpected events and will be sufficient to keep pace with inflation.

One of the best resources of building a retirement nest egg is through one's place of employment. Specifically two types of employee retirement income can be accomplished by working for a company that has a pension plan and offers a 401 K benefit.

401 K

The 401 K option is an excellent opportunity to build up employee retirement income for the worker s future retirement plans. The excellence of this particular employee retirement income strategy is based on a number of reasons.

One of the first reasons why a 401 K plan is an excellent retirement income investment is that it is a partnership between the employee and employer. This is because the employee contributes a certain percentage of their income into a 401 K. In turn, the employer matches that amount or percentage of the employee s income.

Generally the amount that is matched by the employer is capped at a certain percentage. However, this does not stop the employee from contributing an additional percentage of their wage up to the limits set by the Federal government.

In addition, these monies can be submitted through a pre-tax option. This means that the individual can contribute that money prior to any taxes being deducted for that particular amount.

The one other benefit to a 401 K plan is that generally these funds are invested in a vehicle that will most likely provide a good return on the investment. Some of those vehicles could include the stock market, mutual funds, bonds, etc. Therefore, an individual s 401 K plan will grow and help to increase the amount of the employee retirement income.

Pension

Another benefit that may be offered by an employer that can add to an employee s retirement income is a company pension plan. Often these pension plans are set up to encourage their employees to stay with a company. This benefit usually allows for the employee to be vested after a certain amount of time and then fully vested when additional time has lapsed.

Often, this is money that is paid on behalf of the employee by the employer at no cost to the employee. In addition, once the employee has retired and the employee pension plan is activated this allows for a set amount of employee retirement income to be paid to the retired employee.