Retirement planning can be overwhelming if you do not know where to start.
You are planning for your future retirement and estate.
Taking these steps puts you far ahead of most of your American peers.
Let us take a look at a recent Kiplinger article titled “6 Answers to Your 401(k) Questions.”
401(k)s are a great retirement asset.
Still, you are not alone if you have questions.
What are some of the top questions asked?
This will depend on a few factors.
Does your employer have a retirement plan?
If so, does it include a 401(k) or a 403(b)?
Chances are your Human Resources department would have discussed your enrollment when you were hired.
Did you get hired before the retirement plan was in place?
You will likely have been called into a group meeting to explain the plan.
Be sure you work with HR to enroll.
Does your employer have a match?
Take full advantage of this.
If it does not have a match, you may want to go the personal route and set up your own traditional IRA or Roth IRA.
Should I choose a Roth or Traditional IRA?
Not all employers offer Roth plan options.
If you do have a choice, you will want to make the best decision for your unique circumstances.
With a traditional IRA, your taxes for the account are deferred until you withdraw money in retirement.
At that time you will be taxed on the contributions and on the gains.
With a Roth you are taxed before the money goes into the account.
When you withdraw funds you will not owe taxes on the contributions or the gains.
In short, you pay taxes now with the Roth and later with the traditional IRA.
A Roth is smart if you are eligible.
Because you will not pay taxes on the money in retirement.
If your income tax rate increases, the money in the account will not be subject to them.
How much do I contribute?
There will be IRS contribution limits and additional contribution limits for your company plan.
Be sure you are comply with these.
You should also contribute at least up to the company match.
This way you are maximizing the funding of your retirement savings.
Look at it as "free" money from your employer.
Considering contributing more?
Look at your budget and cash flow.
If you can afford to give more ... then, by all means, give more.
How should I invest?
Investments are not the same for every person or every stage of life.
You should consider a few primary factors:
- Investment timeline,
- Risk tolerance,
- Other available retirement assets, and
- The amount you can contribute.
When do I change my investments?
Many people do not adjust their investment choices.
Although you may be able to get by with this, you should not neglect your account until your retire.
This would be unwise.
Available investments, life events and goals may change.
You will want to address your investment strategy to meet these changes.
Reviewing your investments annually is a good practice.
With a few of these main questions answered, the key is to get started.
Work with an experienced financial planner and estate planning attorney to make wise choices for your retirement future.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Kiplinger (June 2017) “6 Answers to Your 401(k) Questions”