If your employer offers a 401(k) plan or other retirement savings plan, there are many reasons to join.

• It’s easy Most company plans allow automatic payroll deductions.
• Invest before taxes Your contributions come out of your paycheck before they’re subject to federal, state (in most cases), and payroll taxes.
• Potentially pay less tax Your taxable income may be reduced by the amount you contribute.
• Have more left over Compared to after-tax investing, you may come out ahead.

This is a hypothetical example.

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When you invest with a company sponsored retirement plan, your earnings are usually tax-deferred. Since earnings aren’t taxed until they’re withdrawn, you may accumulate money faster than in a taxable account where taxes are due each year. You will pay taxes when you take money out, and withdrawals prior to age 59½ may be subject to an additional 10% tax penalty.

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