Prepare for retirement by properly managing your 401(k).
Does your employer sponsor a 401(k) plan for its employees?
If so, you have a great tool at your disposal for retirement saving.
These plans are currently helping more than 52 million active participants, retires and former employees.
Interestingly, the Investment Company Institute recently noted that the 401(k) plan retirement system contained $4.8 trillion in assets in March 2016.
Although the average individual with a 401(k) has about $101,650 in his or her account, about 45 percent of American households with working age adults have no retirement account.
Are you one who is preparing or one who is not?
According to a recent Kiplinger article titled “The 7 Most Common 401(k) Mistakes to Avoid,” a good goal is to save 1 million dollars while you are employed.
Why this number?
You would be able to withdrawal $5,000 a month for 30 years at a 6 percent annual investment return.
What practical steps can you take now to help better position yourself for retirement later?
Save the right amount.
How much should you save to reach this goal?
With the same 6 percent return, you should set aside $1,000 monthly for 30 years.
Start now.
If you begin saving earlier, your money will have more time to grow.
You will also create a habit of fiscal responsibility.
Think of it as delayed gratification.
Max out your contributions.
If your employer provides a match, you should contribute at least this amount or percentage.
Do not limit yourself to this amount.
You should save more, but you will at least get the most from your employer.
Prioritize.
You should make saving for retirement a priority.
Make the maximum amount of contributions you can to your accounts.
Decrease your taxes.
By saving for retirement, you could decrease your federal income taxes.
The funds you and your employer set aside in your account are truly pre-tax, plus they grow each year tax-deferred.
Why not harness that economic wonder for yourself?
Allocate your funds.
You should develop a plan.
The default option may not be best for you.
Your contributions should help you reach your goals.
Monitor your accounts.
Your needs will change over time.
Review and update your portfolio periodically.
Work with an experienced financial advisor to help meet your financial retirement goals.
Do not go it alone.
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.
Reference: Kiplinger (July 2017) “The 7 Most Common 401(k) Mistakes to Avoid”
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