Participating in an employer sponsored plan such as a 401k is one of the simplest ways to accumulate savings for retirement.
Contributions made through paycheck deferrals are supposed to provide a steady savings over time, however that is not always the case.
One problem with this type of retirement savings system is that it is voluntary, meaning each individual employee decides if and how much to put in, and in what way to participate.
Unfortunately many of us are not in a position to understand what we need to save for retirement, or we didn’t start our retirement planning early enough in our careers that we do not accumulate enough to get us through our retirement.
How much your 401k plan will be able to pay you when you retire is unknown and will depend on how the contributions were invested.
Typically what is invested into a 401k is pre-tax dollars, and that is why they are so popular.
Your taxable income is reduced by the amount you contribute to the plan, however it is not completely tax free.
If you contribute pre-tax dollars you will pay income taxes on the money that you withdraw from the plan later.
Something to consider:
An employer sponsored 401k does not have to be your only means of retirement income. One good option is an Annuity.
An annuity is an insurance product that pays out income, and can be used as part of your retirement strategy.
How it works is that you make an investment in the annuity and then it makes payments to you on future dates or on a series of dates.
The income you receive from an annuity can be doled out monthly, quarterly, annually, or even in a lump sum payment.
With so many products on the market it is important that you do your research when it comes to retirement planning. We are here to help.
We urge you to give us a call to speak with one of our trusted specialists.
We are here to help make your retirement planning less daunting.
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Our next entry in this 4 part series is about Life Insurance, which can help to ensure your loved ones can maintain their standard of living, if something were to happen to you.