A simpler way to enroll in your 401(k)

Make the affordable choice of a Paychex 401(k) plan and feel confident in your future.

 

401(k) Basics

A 401(k) plan is an easy, affordable step toward saving for your future. Once enrolled, you elect to contribute a portion of your wages toward your plan on a pre-tax basis. The pre-tax dollars can grow without being taxed until you start withdrawing amounts from the plan (typically, when you retire). You will also earn interest on any contributions that you make, and this accumulates tax-deferred as well.

Enroll or Make Changes to an Existing Plan
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Start Small to Save More

Use your own numbers to determine how close you are to your retirement goals.

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Paychex can help you determine attainable retirement savings goals for each stage of your career. Our tools provide information about 401(k) benefits, diversifying your portfolio, and how to invest for long-term success. Paired with our deep industry knowledge, you can rest easy knowing that you have enrolled in a 401(k) from the leader in retirement service providers.

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Save a Little, Earn a Lot

The earlier you start saving for retirement, no matter how small the contribution, the more you can save into your 401(k) plan in the long run. Start now with any amount you can afford, and build up to your goal over time.

In the short-term, saving into a 401(k) plan can put more money in your pocket. Each pay period, 401(k) deductions are made before taxes are withheld, so you can save more in taxes at the end of the year.

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The Power of Time & Compounding

The Power of Time & Compounding

What is Compounding?

In simple terms, compounding means that you will earn interest not only on your 401(k) contributions, but also on any interest you've already earned. As a result, the earlier you start to contribute to your 401(k), the more powerful the compounding effect becomes, and the faster your 401(k) will grow.

Save a Little—Earn a Lot

Even small amounts like 1-3% of your salary can really add up over time. Investing less of your salary over a longer period can actually result in more money than by investing double the amount in half of the time. Start now with any amount you can, and build up to your goal over time.

compounding graph

Invest for Long-Term Success

Though planning for retirement can be intimidating, 401(k) plans have options that make investing easier for people who might not be familiar with the stock market. By having the right mix of stocks, bonds, and cash reserves, your assets will be able to maintain value in poor market conditions and increase in value when the market is doing well.

401(k) Plan Benefits

Benefits of a Retirement Account

See How Much You Can Save By Starting Now

Contributing to a 401(k) can generate a large immediate rate of return (ROR) on your investment. Let's see how investing 10% of a $1,250 biweekly paycheck could affect your assets.

By investing in a 401(k), you'd immediately take home $585 extra in tax savings. If your employer matches 3% of your salary, you'd get an additional $975 deposited into your retirement account for free. Assuming a 4% annual market rate of return, your account would also generate $169 of interest. At the end of the year, that's an additional $2,314 in your pocket and retirement account just for contributing to a 401(k).

In other words, contributing 10% of your salary to a 401(k) would generate a whopping 140% immediate rate of return.

You can see the effect of contributing to a pre-tax account such as a 401(k) in the pie charts below.

benefits graph

Post-Tax Retirement vs. Pretax 401(k)

Contributing to a 401(k) offers additional benefits beyond a post-tax retirement plan.

In our example, contributing to a pretax 401(k) saves $22.50 per biweekly paycheck or $585 a year, allowing more money to be invested without decreasing overall take home pay.

*Assumes $1,250 biweekly salary, $125 biweekly contribution, and 18% combined state and federal tax rate.

benefits graph take home pay

What Are the Benefits of a 401(k)?

Contributing to a pre-tax retirement plan such as a 401(k) reduces your taxable income. Because less of your money is being taxed, you can take home more money than if you contributed the same amount to a standard taxable savings account.

How Does it Work?

A 401(k) plan helps you save pre-tax dollars, which can grow without being taxed until you start withdrawing amounts from the plan. This feature is especially beneficial if, like most people, you will retire in a lower tax bracket. Your 401(k) also has the ability to grow faster than similar investments made to ordinary taxable accounts, because the interest you earn on your investment grows tax-free.

Helpful Resources

With GuidedSavingssm, a Web-and phone-based tool from independent financial advisor GuidedChoice®, you can access helpful information on the basics of personal investing, along with calculators and other resources to help you reach your retirement goals.

Achieving Retirement Goals

Calculating Your Retirement Goal

See How Different Retirement Salary Goals May Be Achievable

Goals are very subjective and highly dependent on individual circumstances. Creating an accurate reflection of income requirements for retirement can make a goal more attainable.

By lowering your 65% retirement income replacement goal and increasing your contribution amount (orange bars), you may find a comfortable compromise at a 55% goal.

retirement goal graph

How Much Should I Calculate?

The amount you will live on after retirement can vary from person to person. Those who will live conservatively in retirement may budget for 50% of their pre-retirement income, while others who still have expenses like mortgages, or want to spend more on vacations and travel, may want to budget for 90% of their pre-retirement income.

Factors to Consider

When saving for retirement, you may also want to consider the amount of social security, and other benefits or wages you will receive each month. Living expenses such as mortgages, cars, predictable medical expenses, etc. should also be factored in.

Obtaining Your Goal

With the GuidedSavingssm tool by GuidedChoice®, you'll receive a detailed and personal analysis of all of your retirement factors. This analysis will provide a specific recommendation that you can follow, or you may decide to implement a strategy of your own.

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Expert Guidance

We understand that deciding to put part of your paycheck toward retirement savings can seem risky. That's why Paychex gives you the option to receive expert, individualized investment advice through GuidedSavingsSM from independent advisor GuidedChoice®. This Web-based tool can help you:

  • Manage risks that may come with having a 401(k) plan;
  • Determine savings rates and allocations needed to reach your goals; and
  • Feel more confident about your investment decision-making.
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