Retirement Guys: Beyond your 401(k)Written by Nolan Baker Mark Clair | | firstname.lastname@example.org
If you are a saver and have listened to good advice and invested, you are probably on a good track for having a nice retirement. Many people have realized the government can’t take care of everyone, and pensions are becoming a thing of the past. Most families can benefit from saving beyond the company 401(k) and here are four reasons why.
It is almost always a good idea to save as much as possible in a retirement account like a 401(k). Countless studies have shown that saving early and saving more can have a dramatic long-term impact on building a big retirement nest egg. Yet, one of the times a family needs to consider how to redirect their savings is when they have high-interest debt. If you don’t pay off your credit card every month, rates can run anywhere from 15 to 25 percent a year. For investors who are saving in a 401(k) and who have high-interest debt, consider backing down contributions to what the company matches and take 100 percent of the extra savings and put it toward paying off your debt. It will take some discipline, but trust us —being debt free is a key to long-term financial success.
No company match
After the financial crash of 2008, several companies looked for ways to cut costs. One way some companies accomplished this goal was to eliminate the company match they make into employee retirement accounts. From what we have seen, this trend has started to change and a lot of companies that stopped company matches have started back up. Yet, for employees who still don’t get a company match, try investing half of the savings in the company plan and half of the money in other accounts like Roth IRAs and individual accounts. This advice doesn’t take into consideration each person’s individual tax rate, but it is a good way to diversify the taxation of accounts and gives an investor more buckets of money to draw from in the future.
Beyond the company match, investors looking for more choices should consider spreading out the investment savings between annuities, cash value life insurance, Roth IRAs or individual accounts to get more customized options.
It would be surprising if we told an investor to stop saving money for the future. Yet, remember to not put all of your eggs in one basket. A family that puts 100 percent of its money into tax-deferred retirement accounts, like a 401(k), may end up having limited access to money and/or face future tax burdens. Strict rules apply to how and when a person can take money out of a retirement account, otherwise huge tax penalties can apply for those who withdraw funds early. Remember to diversify savings into taxable, tax-deferred and tax-free accounts for more flexibility in the future.
For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysnetwork.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. (419) 842-0550.