The main advantages that are available to employees of corporations who use their company’s 401k plans include tax advantages on the returns from the investment, additional contribution from the employer match programs, benefit of customizing their investments and the flexibility provided regarding the re-allocation of funds in investment. The portability of the 401k plans as well as the loan and hardship withdrawal options that are provided through the 401k plans are also amongst the significant advantages that an employee can attain through the selection of the 401k programs.
The tax advantages of the 401k plans are enormous and can greatly prove beneficial for the employees. Through the 401k plans the investment which is made by the employees becomes tax deferred. This means that the dividends on shares invested in, the income or the returns on the investments made under the 401k plans are not liable for tax deductions until the employee makes any withdrawals or checks out the funds. The funds as a result are only liable for taxation once and that is when the employee retrieves the fund from the investment option. This is a great advantage available to the employees as investments made in mutual finds or savings accounts not under the 401k plans are taxed annually and can therefore reduce the overall savings volume.