I don’t have any debt. Do I still need a 401K plan?

Q: I have managed to pay off all my debt, even my massive student loans. I am completely debt free now. I know that 401K plans are great for retirement savings but do I really need them even though I have no debt and that means I don’t have any recurring drain on my finances? Why can’t I just save through regular methods like bank FDs or stock market investments or other things like these? Please advise- Joyce, New Jersey.

Ans: Joyce, it’s good that you have paid down all your debts and that you are debt free now. That’s a very important move if you want to have a financially secure future and an anxiety free retired life.

Now to move on to your question, yes, you DO need a 401k plan even if you have no debts to pay off. Yes, you can surely save through the regular methods, like you have mentioned, stocks, CDs, FDs, bonds etc. The big difference is that, with these, you have no tax advantages that can cut down your payment to Uncle Sam. Also, the risk factor that you take on with investments like say, stocks, is really high but with a 401K plan you have the advantage of diversifying your investment into many options that are chosen by YOU. You can easily clamp down on your risk with the 401K and that’s something that becomes a huge advantage as you near your retirement age.

Here is another very pertinent factor to consider too: Does your employer put in his own money in your investments in CDs or Bonds or FDs or stock? Absolutely not! But with 401Ks, your employer may make contributions that are equal to your own. That translates into free money for you to put away for your retired life. You don’t really want to say ‘NO’ to free money do you?

With so many benefits to offer, 401K plans are the smart choice for anyone who is financially savvy. Plus, go with a reliable provider like www.401keasy.com and setting up the account, making contributions and tracking it is all so easy that it just takes a few minutes of your time each month. Don’t ignore the fantastic saving opportunity that these plans present to you, Joyce. Go open your account right away and make sure you ask your employer about matching contributions too.