Retirement Benefits

There are three major types of retirement plans an employer might offer you:

• 401k: a retirement savings and investing plan that employers offer. A 401k plan gives employees a tax break on money they contribute. Contributions are automatically withdrawn from employee paychecks and invested in funds of the employee’s choosing. (Source: nerdwallet.)
• IRA: An individual retirement account (IRA) is a tax-advantaged investment account individuals use for retirement savings. Contributions to some IRAs may be tax-deductible or withdrawals may be tax-free. (Source: nerdwallet)
• Pensions: A pension is a retirement plan that provides a monthly income in retirement. Unlike a 401k, the employer bears all of the risk and responsibility for funding the plan. A pension is typically based on your years of service, compensation, and age at retirement. (Source: the balance)

401k is one of the most common retirement benefits that employers offer, so check out the video below for a more detailed breakdown of how they work!

Additionally, an employers may offer two other benefits:

Employer match

Some employers offer to match your retirement account contributions up to a certain percentage of your salary. For example, if you put 3% of your paycheck into your IRA, 401K, or pension, your employer will pay that same amount every time. This is something that you should take advantage of because it increases your earning and savings potential. If you can, you should make an effort to always invest up to the amount your employer will match because it basically doubles your contributions up to that point.

Sometimes, you need to stay at the company for a certain amount of time before you can qualify for retirement benefits. This is referred to as "being vested." Your human resources representative can tell you how long you need to work in order to be vested. This can vary by company, and sometimes you can lose the amount your employer puts in if you leave the company before a certain amount of time.

Stock options

Stock options allow you to purchase stock for the company you work for at a set price. There is a waiting period set by the company as to when you can sell the stock. Generally, you receive the stock options a lower price, and then sell them when they are worth more. Using your stock options is a great way to increase your savings and a great benefit offered by many start-up companies.