401K plans are one of the best ways to save for retirement. However, it has come into question lately whether or not many of the 401K plans out there are actually as good as they should be. Are you getting shortchanged? Is your employer giving as much as they should be?
Lets take a look at some questions you may want to ask in regards to getting the most out of your 401K.
According to Forbes, you could be missing several essential features in your 401K and not even know anything about it. Go over these key questions and don’t hesitate to ask them if you feel the need to.
Does Your Employer Provide a Generous Contribution Match?
There actually isn’t a law that says your employer has to match any certain amount, so amounts can vary. However, you want to make sure the amount they are matching is at least worth your while.
Are You Offered a Roth 401K Option?
With this option you don’t pay any taxes on withdrawals — if held within a certain timeframe. The drawback is that you have to pay tax on Roth contributions. There’s no tax taken out on 401(k)-type plan contributions. This plan makes even more sense if you are going to be in a higher tax bracket when you retire. Roths can reduce your tax liability.
Do You Have Target TGT Date Funds?
According to an AonHewitt study, nearly all employees offer these now. These all-in-one funds package a number of mutual funds that reduce your exposure to the stock market as you get closer to retirement.
Can You Opt Out of Company Stock?
Why would you want to do this? Because your retirement contributions go into a single security, which is very risky. Even if you think your company will do well it is much better to spread the contributions around and diversify.
Make sure your 401K is being maximized and utilized properly by asking these key questions. If you don’t like the answers you are getting, you may want to think about some changes.
Original Article Source: Forbes
More on 401K Options: New York Life
