Offering a 401k benefits package is one of the best ways to ensure that your employees stay happy and cared for. In addition, keeping your benefits packages competitive can offer many advantages for employees and employers.

Offering a Competitive 401k Benefits Package: The Basics

A 401k is an employer-sponsored benefits package that allows employees to deposit income into a fund for withdrawal after retirement. Employers can match some or all of employee contributions to this fund. There are two types: traditional and Roth. Each type has its benefits. 

Roth vs. Traditional: What’s the Difference?

There are several differences between traditional and Roth 401k plans, primarily in how they are taxed. In addition, different plans are better fits for different people, so you must understand the ins and outs of each one.

Traditional 401k

A traditional 401k benefits package is an investment option that does not tax you when funds are placed into the account. By putting a portion of your income into a traditional 401k, you can cut down your average income tax amount since the income placed directly into the 401k will not be taxed immediately. When funds are pulled out, however, that amount is then taxed. Traditional 401ks are best for those who want to collect the benefits of a 401k upfront and allow their contributions to be taxed later.

Roth 401k

A Roth 401k benefits package is an investment option that taxes contributions when placed into the 401k. Investing your income into a Roth 401k does not offer the up-front benefits of a traditional 401k, but the funds, in turn, are not taxed when pulled out of the account so long as you are at least 59.5 years of age when the funds are removed. Roth 401k packages are best for those comfortable with being taxed up front to experience untaxed funds when they are pulled out later. 

If you’re having trouble deciding which plan is right for you and your employees, you may want to consider offering both. Investing in both a Roth and traditional 401k can diversify your tax profile and hedge your bets with the investments. 

Why Should You Offer a 401k Benefits Package?

There are endless reasons to offer 401k benefits packages to your employees and even more reasons to keep them competitive with the rest of the market.

Other ways to offer your Employees Competitive Benefits

Why stop at a 401k? If you’re an employer looking for ways to provide your employees competitive benefits packages, there are many different avenues.

Outsource your HR Services With Canal HR

Are you having difficulties deciding which benefits to offer, how much to offer, or how to deal with other employment-related issues? Canal HR is here to help! Canal HR is a professional employer organization (PEO) that has been serving the southeast region of the United States for over three decades. Canal HR offers various services, including payroll administration, risk management, and more. Contact us today to learn more about outsourcing HR services for your organization.

This content was originally published here.

In this article: