What Every Employee Needs to Know About 401(k) Savings

Are you familiar with 401(k) retirement funds?

More and more employers are offering 401(k) plans as an employee benefit, and if you have the option and are not currently taking advantage of it, it may be time to rethink your savings strategy. Not only do these popular plans offer the advantage of using pre-tax dollars (and thus lowering your taxable income each year), but they are also a simple way to ensure that you’re putting away money regularly, without having to give it a thought once you’ve set up the plan.

Employers can sign you up automatically in the 401(k) plan that they offer, but even if you have to opt into a plan, once you’ve done so the amount that you’ve elected will automatically be deducted from your paycheck and deposited into your retirement savings account. All you have to do is decide how much you want to set aside each week. The answer to that question is entirely up to you and should be based on what your goals are, as well as variables like your living expenses and your age.

The closer you are to retirement age, the less time you have to save so you may want to bump up the amount that you deposit. Because the money that you invest will compound, the sooner you start investing the better. To give you an idea of how money can grow, consider the difference between investing $3,000 a year at an 8% annual return for 30 years – which would add up to $340,856 – versus only saving for 20 years, which would leave you with just $137,752. You also need to keep in mind that there is an annual maximum amount that you are permitted to contribute. Fortunately, that number increases each year. For 2022, the limit is $20,500.

You’ll also want to consider whether your employer offers a match, and if so how much that match is. One of the advantages of the 401(k) type of account is that employers can match all or a portion of your contribution, but you need to make sure that you understand exactly how your individual program works. Some employers will only offer a match up to a certain point, and others will only match if you opt for a minimum percentage of your income. Most experts encourage employees to make sure that they are fully taking advantage of whatever match their employer is willing to contribute.

To give you a sense of how much the average American has in their 401(k) account, consider the results of a recent survey conducted by Vanguard. It showed that those between the ages of 45 and 54 have an average 401(k) balance of $161,079 (median $56,722), while those who are between the ages of 55 and 64 have saved an average of $232,379 (median $84,714). The group that is closest to retirement – those who are 65 and older – do not have that much more than the group closest to them in age: they have an average 401(k) balance of $255,151 with a median of $82,297.

When thinking about your retirement and how you’ll fund your lifestyle, one of the most important questions you need to answer is exactly how you’re hoping to spend your golden years. If you plan to spend your time at home with family, you will need less than someone who plans world travel.

If you don’t have access to a 401(k) account, a Roth IRA is another good option. Though the contributions that you make come from after-tax dollars, you are able to withdraw them and their earnings tax-free at any point after you turn 59 ½. The annual limit that you can contribute to a Roth IRA is currently only $6,000, which is much lower than the $20,500 allowed each year for the 401(k) accounts.

It’s never too early to start saving for retirement, and there are plenty of good options available. If you need guidance on how best to save, contact us today to set up a time to discuss your situation.

Share this article...

Sign up for our newsletter.

Each month, we will send you a roundup of our latest blog content covering the tax and bookkeeping tips & insights you need to know.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

We care about the protection of your data.

Junglebooks Affiliate Program

Why Partner with Us?

With years of experience and a team of certified professionals, we deliver exceptional results to our clients.

Industry-Leading Expertise

Our firm is a leader in the accounting industry, providing comprehensive services that include tax preparation, bookkeeping, financial planning, and business consulting. With years of experience and a team of certified professionals, we deliver exceptional results to our clients.

Attractive Commissions

We value our affiliates and offer competitive commission rates for every client you refer who signs up for our services. The more clients you refer, the more you earn.

Comprehensive Support

We provide our affiliates with all the resources needed to succeed, including marketing materials, dedicated support, and regular updates on our services. You’ll have everything you need to effectively promote our firm and earn commissions.

Trusted Reputation

Our firm has built a solid reputation for excellence and trustworthiness. When you refer clients to us, you can be confident that they will receive the highest level of service and satisfaction.

Frequently Asked Questions

This firm prepares tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. Our firm’s seasoned professionals are experts in all areas of taxation including:


  • Individual Returns
  • Payroll Tax Issues
  • Business Returns
  • Sales Tax Returns
  • Rental Income Returns
  • Business Consultation
  • Expatriate Returns
  • Fiduciary & Estate Returns
  • Corporation Returns
  • Bookkeeping
  • Partnership Returns
  • LLC Returns

Our firm offers a full range of planning services including, but not limited to:


  • Individual Tax Planning
  • Business Tax Planning
  • Business Organization
  • Rental Properties
  • Foreclosures and Repossessions
  • Retirement
  • Investments
  • Sales and Exchanges
  • Pension Plans
  • Education Planning
  • Finance & Refinance Planning
  • Home Purchase and Sale Planning
We are here for you twelve months a year, not just during tax season. Whether you have a simple tax question, need advice on the tax implications of a business decision, or want clarification on a government notice, feel free to give us a call.
We maintain a policy of the strictest confidence concerning our clients’ affairs. You can rest assured that no one will learn about your business or tax status – even relatives, associates or friends who might have referred you to us.