Retirement

By Kanaly Staff

At a time where baby boomers are beginning to retire and the dependability of your Social Security benefit is in question, it is important to take every opportunity available to build your retirement portfolio.

Participating in employer-sponsored plans, such as a 401(k), is one of the easiest and most popular ways to do this. Despite how readily available these plans are, many people are not taking full advantage. Below are a few tips to help you get the most from your retirement plan.

Maximize Your Contributions

If possible, contribute the maximum allowable amount to your employer’s retirement plan. This rewards you in several ways:

• Maximizing pre-tax contributions lowers your taxable income. For example, if you earn $100,000 a year and contribute $15,500 to your employer-sponsored plan, you’ll pay income taxes on $84,500 instead of $100,000. Contribution limits differ depending on the type of qualified plan, so contact your employer for your plan’s specific limits.
  
  
• Contributing the maximum allows you to capture the full employer contribution. Employers will often match employee contributions dollar-for-dollar up to a certain percentage. These contributions are basically free money from your employer; if you can’t contribute the maximum, at least try to contribute up to the limit your employer will match.
  
• Maximizing your contributions also allows you to maximize tax-deferred growth. Not only are you able to contribute pre-tax dollars, but the earnings on those funds will grow year after year and aren’t taxable until distributed.

Understand Your Investment Options

While maximizing your contributions is an important step toward taking full advantage of your retirement plan, it is also important to carefully consider your investment options.

Most company retirement plans offer a set selection of mutual funds or other investments. Each investor should consider their own situation and risk tolerance before making investment choices. No matter what investment style fits your stage in life, diversification is key.

Your financial advisor is a great resource when evaluating your retirement funding options. They can provide you with information about your employer-sponsored plan that helps you make the most of your contributions, as well as offer advice on your investment choices.