Sample Essay

Employees should participate in the 401k plans as they are highly convenient and low maintenance for the employees. The monthly contributions that are put aside into the investment under the 401k plan are deducted from the monthly salary paycheck of the individual on an automatic basis. This means that the employee does not have to worry about making payments into the plan or budgeting for them. Moreover these contributions are matched to a percentage of 25% to 200% by the corporations.

These matched contributions are equivalent to free money for the employee, which is being invested for them in investment options under the 401k plans and therefore another advantage of using the 401k plans. The employees on the other hand can also benefit through the dollar cost averaging to buy low in the way of investments and sell high for higher returns. This is possible due to the flexibility of alternating investments as provided by the 401k plans

Another benefit that exists for employees who invest in the 401k plans is that they are able to save money from tax deferrals. The 401k plans allow the employees to defer their taxes on the principle investment as well as the returns on the investment till they choose to check out the funds from the investment. As a result the tax is payable only once instead of an annual basis which is advantageous for employees as the other forms of investment in mutual funds and savings accounts not under the 401k plan are taxed every year. The employees using the 401k plan as a result have to pay less in the way of taxes.

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