Why are 401(k) plans attractive to employees?
The most obvious advantage of participating in a 401(k) plan is that it will immediately reduce you income taxes. For example, if you have $1,000.00 deposited from your paycheck into your 401(k), your taxable income drops by $1,000.00. You will have $1,000.00 deposited into your investment account which will not be subjected to income tax until you take the funds out. Most individuals invest in a 401(k) plan while they are working and are in a high tax bracket, then withdraw the funds when they are retired and in a lower tax bracket.
