Planning for the future is not something that all of us take the time to do, especially when we're in our 20s or 30s, but saving for retirement is something that everyone should think about, starting when you get your first job. Unfortunately, many of us put things like retirement plans and life insurance off until we're in our 40s or 50s, making it difficult to receive the best benefits for long-term use. However, as with anything, there are both risks and benefits to investing in a retirement plan, all of which should be carefully considered before making a decision.
Pro: Employer Profits
Many employers benefit from offering employees retirement plans, including tax advantages. Plans that are founded or based on company profits may also encourage employees to work harder, increasing profit and productivity on the floor and in sales that are hard to ignore in benefits to contributions to employer-based retirement plans.
Con: Time Constraints for Employers
It takes time to arrange and set up retirement plans for employers and often requires professional help and advice, which may cut into business profits.
Pro: Tax Benefits
Most employers offer IRAs (Individual Retirement Accounts), special savings-types accounts that offer tax-deductible contributions that may be written off every year on IRS tax filing forms.
Con: Penalties
Most IRAs come with penalties if you withdraw money from the account before it matures, or before you reach retirement age. Some IRAs charge up to a 10 percent penalty on whatever amount you withdraw, and you may also be required to pay income tax on the withdrawn amount as well.
Con: Limit
Some individual retirement account plans have caps on annual contribution amounts depending on who provides the account. Banks, credit unions, employers who match contributions and investment companies all have different stipulations on contributions. For example, the IRS states that employee contribution limits cap out at $11,500 and employers generally match up to 3 percent of pay, or 2 percent non-elective contributions for employees.
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