Jeff Rose from U.S. News and World Report wrote a great article outlining some mistakes to avoid when planning your retirement. I primarily work with those who are within 10 years of retirement and beyond and I can often see the difference between those who made these mistakes, and those who didn’t.
Here are some of my observations concerning Jeff’s article:
To jump directly to Jeff’s article ► Click Here
Failing to Maximize Your 401(k) Match
A 401(k) is an employer-sponsored plan that was introduced in 1978 – as traditional pension plans started to become more rare. In order to entice employees to contribute to the plan, employers offered “matching programs” allowing the employee the opportunity to accumulate more money during their employment.
Matching programs were quite common up until 2008, when many employers began cutting back on their contributions. But there are still some employers who provide generous matiching programs.
If you are not at least contributing the amount that your employer requires to maximize a match, you may be leaving money on the table – money that your employer would like to give you.
Consider calling your Human Resources Department and inquire about the details of your 401(k) program and determine if you are maximizing your benefit.
Borrowing From Your 401(k)
Many 401(k) plans allow participants to borrow from their plans while crediting the interest (if any) back to the participant’s own account. Retirement plan loans may seem like a convenient way to get a short term loan, but there are some pitfalls you should consider.
One pitfall you should be aware of is that loans gemerally must be repaid back to the plan before you separate service. If you leave your employer with an outstanding loan, the balance of that loan may be taxable to you and an additional 10% penalty may be assessed if you are under age 59 1/2.
Participants should weigh their options carefully to help maximize the growth of their 401(k) account.
Starting Too Late
It may seem like I’m stating the obvious, but those who begin saving sooner may be better prepared for retirement down the road. But getting started can be difficult for some – for a number of different reasons. One reason I hear most often is, “I can’t afford to save”.
But saving for your fugure should become a reality at some point. Financial commentator and radio personality Dave Ramsey says that saving for the future must become an “emotional priority”.
Starting may be easier than you think. Consider contacting a Financial Adviser who can help you determine an appropriate course of action.
To Read the U.S News and World Report Article ► Click Here