Published by Teresa Milner
Your 401k has a meaningful purpose, but are you failing to meet its objective? Are you using your 401k to provide meaningful retirement income? If there isn’t a company plan offered, are you looking ahead and planning for yourself?
Whatever the situation may be, know that the majority of the responsibility with your 401k rests on your shoulders (that’s why they’re often referred to as self-directed). So take charge and make the most of what is offered!
When thinking about your 401K plan (if offered), below is a checklist to follow:
- Make sure you are participating. Don’t put off today what will benefit you tremendously in the future.
- Is there a company match? Make sure you are contributing enough yourself that you get the full company match. Don’t leave money on the table that could go towards retirement.
- Do you know if you’re contributing the right amount to accomplish your retirement goals? Contributing 1-2 percent more can compound into a big difference in the end.
- How much risk are you taking with your investments in your 401k? How much risk should you be taking? Don’t unknowingly risk losing a big share of what often times ends up being your largest asset. Also, a very conservative strategy might miss out on the gains of the market in the long term. You should always know where you stand with the risk/reward of your 401k.
- Have you taken time to educate yourself on the options within your 401k? Does the education (if any) from your 401k provider fit your personal circumstances?
- Do you have a Roth option in your 401k plan? Should you be participating, and if so, are you? Know and understand the difference between pre-tax and after-tax contributions.
- Does your company offer a stock purchase plan? If so, how much should you participate in this? Don’t miss out on an opportunity that you could greatly benefit from but at the same time, having a concentration in one company can have more risk than you willing to take.
- Do you have an old 401k from a previous employer? Don’t forget about these and leave them behind. Get educated on your options with this account.
- Thinking about cashing in a plan when changing jobs? The potential tax consequences of this decision can be monumental in the short-term or long-term.
- Do you understand the tax benefits of participating in your 401k? Uncle Sam is tied into all that we do with our earnings, so get educated on the best avenue for your personal tax situation.
Don’t get caught up in making mistakes with your 401k. Contact an advisor to discuss the best options for you based on your goals, objectives and risk tolerance.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what is appropriate for you, consult a qualified professional.
Investing involves risks including loss of principal. Withdrawals from a qualified plan are taxed as ordinary income and may be subject to a 10% Federal tax penalty if taken prior to age 59 1/2. Exceptions may apply.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified advisor.