Today’s Prep:
Most likely, at some point or another, you’ve had the option of contributing to a 401(k). But do you know how to really leverage it? This episode will tackle some of the frequently asked questions when it comes to your 401(k).
Equipping Points:
A 401(k) is one of the major retirement savings vehicles because it’s easy. You sign up, money is taken right out of your account, and you don’t have to worry about it. But, you need to make sure you manage it well. How do you do that?
When your company offers a 401(k), sometimes there is also an option of getting advice on the 401(k) for a fee. Is this worthwhile? The answer really depends on how the fee and service is set up. Is it being actively managed or are you just getting advice once at the beginning?
Generally, you should save between 10-15 percent of your income. How much of that should go into your 401(k)? If there’s a company match, do what you can to get it. When you don’t take the company match, that is like leaving free money on the table. A lot of times people will take up to the 401(k) match but then contribute to a Roth IRA. This is important doing for the sake of your taxes down the line.
Should you use a target date fund for your 401(k)? If you do choose a target date funds, choose one that is slightly beyond your actual target date for retirement. Target date funds change the allocations from stock funds to bond funds as you near retirement. There are different strategies to consider when it comes to using the target date funds.
Lastly, any time you borrow money, you have to pay interest to somebody. So, if you need the money, should you take out a loan against your 401(k)? It may be an option that is easier than getting a loan from the bank, but should be used more so in extreme circumstances and paid off as soon as you can.
Listen to the entire episode to hear more information about the ins and outs of 401(k)s or click on the timestamps below to get his answer to one of these FAQs.
1:51 – Should I use the company-provided advice on my 401(k) plan for a low fee?
3:21 – Should I contribute as much to my 401(k) as I can or just up to the match?
6:01 – Should you use target date funds?
8:29 – Is it a bad idea to take out a loan against your 401(k)?
9:53 – When should I take money out of my 401(k) and roll it over to an IRA?
Related Resources:
Understanding How Your Feelings Impact Your Financial Decisions
What’s In Your Financial Junk Drawer?
Today’s Takeaway:
[spp-tweet tweet=”Although saving for retirement is important, also enjoying your life along the way should be high on your list. –Eric Peterson“]
More From Eric:
The host: Eric Peterson - Contact - Call: (515) 226-1500
Subscribe To The Podcast:
Apple Podcasts - Google Podcasts - Spotify - Stitcher - iHeartRadio - TuneIn
Check out some other recent episodes
Retirement Real Estate Decisions: Downsizing, Snowbirding, and More
One of the key discussions you may have in retirement is what to do about the house. Should you downsize your home? Pay it off early? Buy a vacation home and become a snow bird? Eric emphasizes the importance of considering not just the financial implications but also the lifestyle changes each of these decisions entail. Weighing out the pros and cons of each decision can highlight what is right for you (which isn’t always the same as what your neighbor is doing).
Read MoreWater Wheels and Retirement Planning
Have you ever wondered how a water wheel can relate to your retirement planning? It might seem like an odd comparison, but in today’s podcast, Eric breaks down this fascinating analogy and its significance in maintaining a stable financial future.
Read MoreNavigating Spousal Disagreements in Retirement Planning
Inside a marriage, retirement planning is a journey that ideally involves both partners working together towards a common goal. However, as with any significant life decision, disagreements can arise. Eric sheds light on some of the most common spousal disagreements regarding retirement and offers practical advice on how to navigate them.
Read MoreFinancial Wisdom from Ernest Hemingway
According to Ernest Hemingway, “In order to write about life, you must first live it.” Eric shares how his years working as a financial advisor have given him the experience to guide others through various market conditions and make a financial plan that is possible to follow. It’s not just about understanding the products and tools; it’s about knowing how people react to different financial stimuli and steering them accordingly.
Read More