Four burning retirement-savings questions to ask on National 401(k) Day
A 401 or similar employer-sponsored retirement account can make saving for the future a lot easier, and effective — if you’re doing it right.
Still, the potential advantages of these accounts shouldn’t be understated. Employer-sponsored retirement accounts are tax-deferred, which means contributions are made with pretax earnings, and many employers offer automatic contributions right from a worker’s earnings, so they never see the money “missing” from their paychecks. Some companies are even offering auto-escalation, so that every year the amount a person contributes increases incrementally, making it a painless way to save more.
Ask yourself if your company offers a match, what it is and how it works. Companies structure their matches differently. For example, one employer may say the first full 3 percentage points are 100% matched, and the following 3 percentage points are matched 50% – in this case, someone contributing 6% to her 401 plan would receive an employer match closer to 4.5%.
One easy way to keep track of your asset allocation is to invest in a target-date fund, which ties investments to a specific retirement year and automatically adjusts asset allocations as the years go on. It’s a simple approach, but doesn’t align with everyone’s goals, so consider working with a financial adviser or asking a professional at the investment firm where your portfolio is housed for more information and what may be best for you.
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