If you have a 401k plan you have likely checked the amount you have in it lately and been extremely disappointed with your returns. The stock market has caused many employees to have their hard earned money places in a 401k slashed down to a much lower level. The important thing I want to point out to employees and investors is that the 401k is still a very powerful tool to use in building a nest egg for retirement.

What is so great about a 401k? The simplest benefit of a 401k can be the time value of money and the power of compounding interest over time. That small amount of money that you invested when you were 26 years old will mean a whole lot to you when you are retiring. A 401k is also a very flexible investment tool. You are in the driver’s seat as far as the investments in your plan, and these assets can be moved at any time. An increasingly important part of the 401k is the employer matching plan. Most employers now match employee contributions up to a certain level on an annual basis. For example, if your employer matches dollar for dollar your contributions up to $1,000, you can get a free $1,000 put into your 401k plan each year.  Perhaps the most important benefit of the 401k plan is the tax advantages it brings with it. The dividends, capital gains, and interest are not taxed until they are paid out.

What is the bottom line here? The bottom line is that while many of you may be hurting in your 401k investments right now, this is not the time to stop investing in a 401k plan. During the worst of economic times, such investment vehicles are only that much more important. Take advantage of the benefits of a 401k plan, especially the employee matched benefits. If you aren’t contributing the amount your employer is willing to match, you are just leaving free money on the table. Even in tough economic times, take advantage of the sweet deal that is the 401k plan.