Losing a savings bond doesn’t mean it’s money lost. Here’s how to find it.
Employee savings plan
An employee savings plan is an important benefit for most workers. Bankrate explains.
What is an employee savings plan?
An employee savings plan is a pooled investment account that is often matched by an employer. Similar to a 401(k), an employee savings plan, or ESP, lets workers deposit a portion of their pretax earnings, with employers contributing a certain percentage or dollar amount. Employees decide how much they want to save and the money is taken directly from their paychecks and deposited into the savings plan.
Employers typically match an employee’s contribution to the savings plan up to a certain dollar amount or up to a certain percentage. Employee savings accounts are intended for long-term financial goals such as retirement, a home purchase or college tuition, and while employees can withdraw their contributions at any time, there may be a waiting period before they can access the funds their employer has contributed.
An employee savings plan is typically offered by smaller businesses that can’t invest in a 401(k). Because employees contribute their pretax earnings, the employee savings plan reduces their taxable income, thus lowering the amount of tax they have to pay.
The employee savings plan has other tax benefits, including the deferral of taxes on the money until it is withdrawn. In the meantime, it earns interest. Employers often help employees set up the employee savings plan, but workers choose their own investments and manage the account.
Employee savings plan example
Gail earns $65,000 a year and contributes $7,000 of that to her company’s employee savings plan. Her contribution comes out of her pretax earnings, reducing her taxable income for the year to $58,000. Gail’s employer contributes 50 cents for every $1 she contributes, up to 6 percent of her pay. Gail has to be with the company for three years before she has access to the employer matching funds. When Gail withdraws the money after she retires, it is taxable.
Use Bankrate’s retirement calculators to set your savings goals and track your progress.
More From Bankrate
3 min read May 17, 2022
Setting aside pretax dollars in an HSA can help you defray future medical costs.4 min read May 17, 2022
Several types of saving accounts are available to help your child pay for college.5 min read May 16, 2022
You can easily find a bank that’s offering an APY much higher than the national average.2 min read May 12, 2022
Here’s everything you need to know about its savings account.1 min read May 11, 2022
Saving for the future becomes crucial as you age and get closer to retirement.4 min read May 09, 2022
A savings account is a useful financial tool for building a stable financial future.4 min read May 09, 2022
Your earning power is growing, but setting money aside isn’t getting any easier.5 min read May 06, 2022
Creating a timeline is a useful way to plan and meet all your financial goals.6 min read May 06, 2022