Take Full Advantage
of Your Employer's 401(k) Plan
Longer life spans, more active retirements, rising costs and uncertainty
over Social Security make the need for a substantial retirement nest-egg
greater than ever. Luckily, many corporate retirement plans offer employees
control over building that nest egg.
Benefits of 401(k) Plans
Convenient Saving. Contributions each pay period make it easier
to accumulate significant amounts over time.
In most plans, the employer also "matches" some portion of the employee
amount each period. Some employers also make contributions based on financial
Tax Deferral. Employees are not taxed on the portion of their wages
they contribute. Funds in a 401(k) plan are not taxed until withdrawn.
Investment Flexibility. Plans often provide extensive investment
options including mutual funds, company stock and other fixed income choices.
Making the most of your 401(k) plan
Retirement plan benefits will probably be one of your greatest sources
of retirement income. Getting the maximum benefit from your plan is simple.
1. Participate in the plan. As simple as this sounds, some studies
have found that many choose not to participate. Even minimal participation
2. Contribute as much as you can. Your plan may have limits on
the portion of your wages you may contribute. The annual limit employee
contributions is $18,500 for 2018. In addition, a catch-up provision allows
for an additional contribution of up to $6,000 for 2018. Determine what
you can afford and make the largest contribution you can.
3. Get the entire employer's match. Review your plan to understand
how the employer's contributions are made and allocated. Your Human Resources
department should be able to help you.
4. Use a sensible investment strategy. Choose a combination of
investment options that match your time horizon and risk tolerance. Generally,
the longer time horizons and greater risk tolerance dictate a more aggressive
investment strategy with greater use of equity investment choices.
Include your retirement plan in your financial planning. Your retirement
plan should be an integral part of your overall financial strategy. Make
sure you consider it as you design and implement an overall financial