There are numerous savings plan options to choose from to help aide in retirement. One of those plans, the 401K Plan is a retirement savings plan sponsored by an employer.
With a 401(k) plan, money is deducted from your paycheck before taxes are withdrawn, which lowers your taxable income and therefore, lowers your taxes.
For example, if you put $100 into your 401(k) each month, your paychecks might only be reduced by about $60-$80 per month. The exact amount will vary depending on salary and tax bracket.
It is important when investing in a 401(k) retirement plan to follow some basic tips on how to invest your funds.
- Create a plan
- Establish realistic expectations, and pick funds that have the potential to meet your goals
- Remember that higher risk doesn’t guarantee a higher return
- Avoid funds that have dramatic up-and-down swings, especially if you are nearing retirement
- Find a professional to help you choose the best investments and take the guess work out of the equation
Bankrate offers a 401(k) retirement calculator to help determine your personal savings plan.
When obtaining a 401(k) plan, it is also important to remember a few financial tips that could maximize the value of your 401(k) plan by the time you retire.
- The 1% rule. If possible, increase your contribution to your 401(k) plan each year until you reach the maximum. Using such a small percentage allows you to easily work the increase into a savings plan each year without hurting the budget.
- If you delay retirement, keep your 401(k). Because people are working into the later years of their life, they do not need to take out that minimum distribution until they actually retire.
- Know your company’s vesting schedule
- Have an emergency fund. It is critical to create an emergency fund so that when acts of life come knocking at your doorstep, you can know you have planned for them and will not have to dip into your retirement plan.
Advantage Retirement Services offers insight and direction on 401(k) plans with their professional financial advisors.
Contact Mike Gann for a free consultation today at (417)893-7233