Retirement plans help give employees financial security, and there can also be tax advantages for both the employer and employee. There are many types of retirement plans, some of which allow the employee to direct investments to fit their personal preferences. Employer contributions are tax-deductible, and some employee contributions can reduce taxable income.
- Compounding interest over time allows small regular contributions to grow to significant retirement savings.
- Small businesses may get a tax credit to help defray the cost of starting certain types of retirement plans.