As part of starting employment with most publicly traded companies, you will often sign up for the company’s 401k plan. While 401k programs vary from company to company, most large corporations will match your personal 401k contributions at a six percent pre-tax rate. That said, keep in mind that hourly and salaried employees often have different plans.
Some companies automatically put you into a target date fund. The fund’s allocation – the balance between stocks, bonds, cash and other instruments - is built based on the length of time you have from when you start in the plan to your projected retirement date. You are automatically put in target date fund with the term that is closest to the year you turn age 65.
Target date funds are meant to be an easy way for people who don’t know much about investing to participate in the plan and the markets. It’s a great to start a plan – to win. But, there always seems to be a but... Target date funds may not be the place you want to be invested for the entirety of your time in your 401k plan. In fact, it’s probably not the best option for most people for the long run. The platforms you have access to as an employee have a variety of funds with which you can build a better-quality portfolio.
That’s why it’s a great idea, not just to invest in a plan to win but to create a plan to win – right from the start. As part of building a financial plan for your future, I review 401k portfolios for clients and help make changes if needed to investments and contribution rates. I build a retirement plan that projects if clients will have enough money to retire based on what they are doing now. If changes need to be made - for example, higher contributions or signing up for an Employee Stock Purchase Plan, we come up with a focused plan for the future - together.
Here are some other reasons to engage with us to create a financial plan now versus later. We will help you:
- Consider the impact of other outside accounts and insurances
- Provide regular reviews of you risk-reward tolerance and how our investment allocations should change
- Provide you more insight and control when life or the markets throw you a curve
- Open you eyes and your mind to other viable alternatives designed to further the attainment of your financial goals
- Help you to take advantage of automatic increases to 401k contributions. What’s this, you say, just reach out and I’ll be happy to explain it – in English.
For hourly employees, note that you often have the ability to contribute part or all of any bonus you receive to your 401k. We can work together to make sure that you capture some of that bonus and apply it towards your retirement. By doing this, you will help defer taxes on the bonus as well as help get closer to maximizing your 401k contribution.
The bottom line is, you won’t be in this alone. Using our dynamic retirement planning tools, we can look at your retirement scenarios with real-time data. Plus, you’ll have access to your plan anytime you’d like to review or make changes. We can be of significant help in assisting you with better understanding and maximizing the value of you 401k and other assets and plans.
Contact us today to get started, on a plan to win.