The advantages of a 401k plan make it an attractive option for people in many stages of retirement. Consider these advantages when you’re doing your retirement planning.

You control what you invest.
One valuable benefit of a 401k plan is that you can control how much you want to invest, and you can typically select from several offerings for your investment options. You don’t have to make a minimum investment to access these funds; instead, you can designate a dollar amount or percentage of your paychecks to go into your 401k from every paycheck. Many employers also give you the option of making your own selection about how you invest. 401k plans typically provide up to 20 options for your investment dollars, so you have some flexibility in choosing your investments. However, each plan will be different.

Some employers match your investments.
One of the biggest benefits that you get with a 401k plan is the fact that many employers match what you invest in a 401k plan, up to a certain point. You may need to meet certain eligibility requirements, such as being employed a certain length of time, but employers who match then make an investment equal to your investment up to a certain limit. Employer matching may range from two percent to seven percent, depending on the employer. For example, if you invest four percent, and your employer matches four percent, you’re actually getting an eight percent investment.

Every employer has specific rules about vesting 401k matches. If you work for an employer for a certain number of years, you typically become partially vested. For example, if you work four years for your employer, you might become 40% vested, meaning that you get to keep 40% of the employer’s matching funds from your 401k account. If you don’t meet the vesting schedule, you don’t get to keep any of the employer’s matching funds when you leave the company. Vesting schedules vary from company to company.

Enjoy tax-deferred status.
401k investments are tax-deferred investments. This means that, when you invest, you invest pre-tax dollars. You don’t pay taxes on the cash up front. This can be helpful if you want to lower your current tax bracket or establish an investment portfolio designed to minimize your tax liability. You won’t pay taxes on your 401k investments until you withdraw the funds from your account. However, if you withdraw funds early, you’ll be liable for paying the taxes, as well as paying any early deduction penalties.

Rollover your 401k when you change employers.
Finally, a 401k doesn’t vanish when you change employers. You can use a 401k rollover to transfer your 401k from an employer-sponsored program to a traditional IRA or to your new company. If your new company accepts 401k rollovers, you can simply transfer the funds directly from your old employer’s account to your new employer’s account and continue with your 401k. If your new employer doesn’t support 401k rollovers, you can transfer your 401k funds into an IRA, which does have tax implications but still protects your retirement funds.