Whether you are an employer or an employee, a workplace retirement plan makes sense no matter how you look at it. For employers, a retirement plan provides value for your business and each person who participates in the plan. Both employers and employees can take advantage of tax benefits and have an easy way to save for their future. It's important to review your plan from time to time to make sure it is still meeting your needs.

Employees - Save Money Now and In The Future

If your employer provides a workplace retirement plan, you have a great opportunity before you. In fact, it's one of the easiest ways for you to save for your retirement, plus get added tax benefits before you retire.

  • Contributions are Automatic
    Contributions are Automatic. Once you enroll, you'll never have to give it a second thought. Your employer will withhold the amount you specify from each paycheck and invest the money according to the investment elections you make.
  • Participation Lowers Your Current Taxes
    Your investment is taken from your paycheck before federal and most state income taxes are withheld. That means your current taxable income will be lower, and you will pay less in current taxes.
  • Your Contributions are Always Yours
    You can take the money you invest in the plan with you if you leave your current employer. Some plans allow you to roll it over into a new employer's qualified retirement plan or a Rollover IRA to avoid paying current taxes and penalties.

Employees - Review Plan Options Regularly

The benefits from your workplace retirement plan can change over time. So a regular review of the available options can help ensure the plan still meets your needs. As a plan participant, you may want to review your contribution levels to ensure you are accelerating your personal retirement savings.

As you review your retirement plan, there are options that may add value for you:

  • Review Your Contribution Percentage
    Tax-deferred growth and time in the plan are a powerful combination for building the value of investments. By increasing your contributions, you'll save more in current taxes as well as build your retirement savings. And a small increase in personal retirement savings now could help make sure you don't outlive your retirement investments in the future.
  • Evaluate Your Mutual Fund Offerings
    Having a variety of investment choices in your plan gives you the opportunity to diversify retirement investments among different types of securities. An individual portfolio generally should include investments that are expected to perform differently during particular economic conditions. With diversification, a decline in any single investment has less impact on your overall portfolio and may be offset by increases in other investments. So select the mutual funds that allow you to build a diversified retirement portfolio within your plan. While diversification can help reduce portfolio risk, it cannot ensure against loss.

Employers - Get More than Tax Benefits

Retirement plans offer significant tax advantages. Your company gets an immediate tax deduction for the amount it contributes to the plan each year, and those who participate in the plan benefit from the tax-deferred growth of their contributions. But a retirement plan provides other benefits for your business if you have employees or plan to recruit employees:

  • Boost Morale and Productivity
    A retirement plan shows your employees that you are concerned about their futures. It can give them another reason to remain committed to your business and its success.
  • Retain Great Employees and Save on Training Costs
    Hiring and training a new employee is costly. According to the American Management Association, those costs can be more than $75,000 for a top executive. A plan with a vesting schedule provides an incentive for your employees to stay with your company.
  • Recruit High-Quality Employees
    Your people are your most important asset. A comprehensive benefits package that includes a retirement plan may give you an edge over your competitors.

Providing for a secure retirement is one more way to build a strong business. As you analyze your business retirement plan, take steps to ensure it meets your business goals and the needs of the participants-even if that's only you.

Employers - Match Your Plan to Business and Personal Goals

It's important that your plan complements your business goals and helps provide you and any employees with a means to save for a secure retirement. Once your plan is in place, reassess it periodically as you analyze your business. For example, you may have grown faster than expected or acquired another business. You may be considering adding employees or moving into new markets. Perhaps changes in your personal life-a marriage, divorce, birth or death-have affected your business or retirement plans. So you may want to consider adjusting your plan to ensure it still matches your current business goals.

Remember You Are a Participant Too

Because you are also a plan participant in your business' retirement plan, you too may want to review your contribution levels and the mutual funds in your own portfolio to ensure you are accelerating your personal retirement savings.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.