How to Maximize Retirement Savings Using Your Company’s Employee Benefits Policy

Employee benefits can have a significant impact on wealth accumulation, but the International Foundation of Employee Benefits Plans reports that 80% of companies struggle to get employees to read benefits materials. If you don’t correctly understand your company’s employee benefits policy, you can’t take full advantage of it. In the end, you could impede your retirement plans.

This is especially true for high earners. While the majority of workers find it difficult to contribute the maximum amount to their 401(k)s annually — which is $19,500 in 2020, plus another $6,500 for anyone turning 50 or older — that limit is not enough for high earners to save for retirement.

For example, consider an employee with an annual income of $50,000 who saves 20% toward retirement. That $10,000 contribution is well below the annual 401(k) limit, and this person can invest the entire balance using a single plan. But take someone who makes $500,000 annually. They would max out their annual 401(k) contributions by saving less than 4% of earnings for retirement, which is likely not enough to maintain their standard of living in retirement. If they would like to save the same 20% — or $100,000 per year — toward retirement, they need to consider other options.

That’s why it’s important to understand all aspects of your company’s employee benefits policy. You’ll soon discover that there are other ways to save.

3 Useful Company Employee Benefits Policies for High Earners

The most advantageous — and often overlooked — benefits companies offer employees that are particularly useful for high earners are mega backdoor Roth contributions, health savings accounts (HSAs), and deferred compensation.

Read the full article at Business 2 Community.