Since Americans tend to be poor savers, this turns out to be an excellent reason to invest in a 401k. Once you decide how much to contribute, the money is automatically taken out of your paycheck each pay period. No discipline required!

2. Employer Contribution

Many employers contribute to 401k plans in the form of a "company match" up to a specified maximum amount. For example, if your employer matches every dollar you contribute with 50 cents up to 6 percent of your gross compensation, this is like an immediate 50 percent return on your investment! No other investment has this advantage!

3. Tax Breaks

Your contributions are pre-tax which reduces your taxable income. This means that, by contributing to a 401k, you are paying yourself more and Uncle Sam less. What a concept! Even without a company match, tax savings make participating in a 401k plan a wise decision. Your contributions also grow tax-free which leads to compounding interest?

4. Compounding Interest

This concept refers to earning "interest on interest". Since your investments are earning interest and growing tax-free, your earned interest remains in the 401k, allowing it to add to your account value and earn more interest. This snowball effect is referred to as "triple compounding".

5. Dollar Cost Averaging

This strategy reduces volatility by purchasing shares of your selected investments in fixed dollar amounts at regular intervals regardless of which direction the market is moving. When share prices go up, you will buy fewer shares at higher prices. When share prices go down, you will buy more shares at lower prices. In other words, you are reducing the average "dollar cost" of your investments.

6. Investment Choices

Your 401k can give you access to quality investments that, outside of a 401k plan, normally require high minimum purchases just to get started. Most 401k plans offer several investment choices that are typically mutual funds in diverse categories.

7. Higher Contributions Than an IRA

The IRS allows an $11,000 tax-deferred maximum yearly contribution for a 401k this year. For an Individual Retirement Account (IRA), it is only $3,000 per year.

8. Portability

Even if you are not 100% vested in the company match, your personal contributions are always 100% vested and you can take your 401k with you after leaving your employer. You may take a cash distribution or "rollover" your account into an IRA or your new employer's 401k plan.

9. Professional Advice

Most investors make their biggest mistakes based on emotion and their best decisions based on logic. It is wise to seek the skilled advice of a professional who can look at your overall account with a logical perspective. Make a point to contact your advisor periodically. Being a participant of a 401k plan gives you the rare opportunity to get free advice from a licensed investment advisor.

10. Retirement

Let's face it, Social Security is not enough to live on during retirement. Take advantage of the huge benefits of the 401k plan and start saving as much as you can now!