Employer sponsored retirement plans: Adding up the pluses Make the most of your retirement savings with employer-sponsored plans. March 25, 2016 Have you ever wondered why financial planners say employer-sponsored plans and Individual Retirement Accounts (IRAs) — such as Discover’s IRA Certificates of Deposit (CDs) — should be the first priority for people saving for retirement? Let’s look at the key reasons why: Tax deferral. Your employer-sponsored plan lets you defer tax on part of your pay by contributing that amount to your plan account. With tax deferral, you don’t pay taxes on that income or earnings in your account until you withdraw the money1. In addition, because your pretax contribution is deducted directly from your pay, your taxable income is reduced. It’s important to contribute as much as you can afford to your plan. Tax-deferred compounding. Compounding is what happens when previous earnings from an account remain in the account and, in turn, earn more money. Because taxes aren’t subtracted from earnings in a tax-deferred account, the effect of compounding can be even greater. Matching contributions. If your employer matches part or all of your contributions, this extra money also compounds tax-free until you withdraw it. Other Tax-Deferred Ways to Save for Retirement Individual Retirement Accounts are also on top of any planner’s priority list. Like employer-sponsored plans, Traditional IRAs allow account earnings to compound on a tax-deferred basis. You may also consider supplementing your tax-deferred retirement assets with additional non-tax-deferred savings accounts. With that in mind, consider the benefits of a Discover Money Market Account, which gives you the best of both worlds: high yields with flexible access to your savings2. After all, the more you set aside today, the better your financial future is likely to be. Discover In addition to offering IRA CDs and Money Market Accounts, Discover also offers an Online Savings Account to help you with your short-term savings goals and a full range of CDs to help you save for the future. It is easy to open an account online or call our 24-hour U.S.-based Customer Service at 1-800-347-7000. The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. 1 Withdrawals are subject to ordinary income tax. Withdrawals made prior to age 59½ may be subject to a 10% federal penalty. 2 Federal law limits certain types of withdrawals and transfers from savings and money market accounts to a combined total of 6 per calendar month per account. There are no limits on ATM withdrawals or official checks mailed to you. To get an account with an unlimited number of transactions, consider opening a Discover Cashback Debit account. If you go over these limitations on more than an occasional basis, your account may be closed. See Section 11 of the Deposit Account Agreement for more details.