Wellman Shew is well-known in the financial services industry. He is a business leader, entrepreneur, and professional working in California, focusing on employee benefits, health insurance, and long-term financial planning. Today, he is the owner of Shew & Company Insurance, which is an employee benefits brokerage that he founded in 2005. Recently, he provided insights into one of the most common financial planning and savings tools, the 401k. There are various benefits of 401Ks that can make them a good investment option.
Save on a Pre-Tax Basis
One of the benefits of using a 401k to prepare for the future is that you can save on a pre-tax basis. When you have a 401k through your employer, any contributions that you make to it will be taken out of your paycheck on a pre-tax basis. Depending on your income and the state that you live in, this can be a dramatic saving in taxes each month. It also helps to increase the amount of money you can save. Wellman Shew and others do caution that withdrawals from the account in the future will be considered taxable income, so it is important that you follow a smart strategy when that time comes.
Employer Match: A Top Benefit
Another reason that you should consider getting a 401k is that you can take advantage of your employer’s match. As an added benefit, many employers will provide a match up to a certain level for every dollar that you contribute to your 401k. While this can vary considerably by company, the match is often 4% or more of your income. This can greatly enhance your return on investment, and it will add up considerably over time. Due to this, taking advantage of your employer-match benefit should always be a top priority.
Another reason that you should use a 401k is that it can be a good way to ensure you are diversifying investments. One concern that people can have with 401ks is that there are limited investment options. Depending on your plan, there may be several mutual funds and other investments to put your money into. While this is a concern for some, it can be considered a benefit for others as this investment mix can ensure your investments are diversified. Wellman Shew would agree that this can help to manage risk.
Wellman Shew will also recommend 401ks for the investment services you can receive. Many services offer a variety of investment options that can be recommended based on your age and investment risk tolerance. The services can offer guidance that will help you allocate your investments, budget for the future, and build a long-term investment plan.
When you are looking to invest for your future than using an employee-sponsored 401k is a great option. Wellman Shew is a financial service professional that has owned his own agency for more than 17 years, and he has offered some insights into why using a 401k to prepare for your future can be a great idea.