How Are You Planning for Your Retirement?
Someday, we will all retire or at least slow down. The question is, how prepared will you before that day? In case you are among those who have not started saving for retirement or have only saved a token amount, there are three things to keep in mind about this retirement strategy.
- First, it’s never too late to begin saving for retirement, and no amount is too small.
- Second, if you have an employer-sponsored 401(k) available to you, you could be missing out on a lot of free money that comes in the form of employer contributions. Before you do anything, contact your plan administrator and determine if there is an employer match and how much it is.
- Finally, I would recommend that you not save for retirement at the expense of your other financial needs goals. Instead, any retirement savings should be built into your budget. It will be deducted on a pre-tax basis and before you ever see it, so the “out of sight, out of mind”
principle will help you save without you even realizing it.
How to Get the Most Out of a Qualified Plan
I often find that people under-participate in a qualified plan because they do not understand how it works, but I am a Section 3(21) qualified plan fiduciary.
As a retirement planner, I not only work with companies in the creation of qualified plans, but I also work with sponsors of existing plans and their employees to help educate them about the benefits and mechanics of those plans. The Department of Labor has many publications about the fiduciary responsibilities of a plan sponsor, and I often work with companies to help them meet those obligations to their employees.
My advice would be to ask your employer if such an educational partnership already exists or
to contact a 3(21) financial specialist to assist you in the enrollment and investing process. This
will be much better than doing nothing.
Not All 401(K) Plans Are Equal:
Pay Attention to the Plan Details
Before you start investing in a 401(k), I recommend that you evaluate several parts of it. Pay attention, for example, to fees.
Fee disclosures are required to be provided to participants, and
over time, the internal expenses of funds and plan costs could be significant. I would also research the plan to determine rates of matching, the frequency of communication, if there are web-based access portals, the presence of retirement planning calculators or similar tools, and whether or not options exist for a self-directed portfolio.
Some qualified plans offer a “Roth” account, which can have significant tax advantages, and the option to directly transfer balances from the plans of previous employers. While I don’t recommend taking loans from the plan, it would also be a good idea to understand the limitations that would apply to requesting loans from the plan if the need arises.
Qualified plans aren’t all cast from the same mold, and yes, there are some good and not-so-good plans out there. At a high level, though, a 401(k) or another similar plan can be a fantastic tool to use for retirement planning. If you haven’t started yet, it’s not too late.
Don’t leave an employer’s match on the table: Just start! Build it into your budget, and work with a professional to help in the design of your portfolio. And as always, if you have any questions about financial planning, or need a financial planner in Alabama, we are always ready to help.
*David R. Guttery, RFC, RFS, CAM, is a financial advisor and has been in practice for 31 years. He is the president of Keystone Financial Group in Trussville, Ala. David offers products and services using the following business names: Keystone Financial Group – insurance and financial services | Ameritas Investment Company, LLC (AIC), Member FINRA / SIPC – securities and investments | Ameritas Advisory Services – investment advisory services. AIC and AAS are not affiliated with Keystone Financial Group. Information provided here is gathered from sources believed to be reliable; however, we cannot guarantee their accuracy. This information should not be interpreted as a recommendation to buy or sell any security. Past performance is not an indicator of future results.