Some common employee benefits of a 401k plan include automatic enrollment, different investing options, the ability to contribute to the fund without paying additional taxes and the option to withdraw against the fund in the event of financial hardship. Other benefits include employer-matched contributions and financial and investing advice.
A 401k plan is a type of retirement savings system wherein the employer deducts a set amount of money from the employee's paycheck each month and transfers it into a special account. The employee is able to invest the funds into a set number of options. As such, the employee does not have to pay two sets of taxes on the funds. It is common for employers to match the employee contributions to the fund, though this is not a requirement. Some plans also allow employees to withdraw some funds from the account under certain circumstances, typically a major financial hardship such as medical bills or a death, without incurring penalties for an early cash out.
Another benefit of a 401k plan is that the employee may choose how to invest the money in the fund. Many companies offer financial advisers to work directly with employees to understand all available options, including the potential risks of investing. Advisers also help employees understand and complete the investment process and allocate money appropriately.