“Hang in there, retirement is only 30 years away!” Workplace graffiti
401k is one of the most common words used when discussing retirement. But what do we really know about them? Most employers offer them to their employees as a means of providing a benefit to their employees. It is also a means of retirement for many workers.
Let’s lay out some stats for you so you get a framework of the influence a 401k has on our retirement.
Total value of assets held in a 401k $4.5 Trillion
- Percentage of assets held in a 401k 18%
- Total number of participants in a 401k 52,500,000
- Percent of works that participate 81%
- Average percent of salary contributed 6.8%
- Percent of assets held in a mutual fund 64%
The average match of company contributions to 401k plans is 2.7%.
Let’s spend a little time to layout what a 401k is and how it works. Then we will spend some time comparing it to a Roth IRA.
What is a 401k?
“A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account.” Wall Street Journal
The 401k was established in 1978 and has grown to become the most popular type of employer-sponsored retirement plan out there.