You probably won’t see this list featured on late night TV. But it’s one that retirement plan participants can appreciate. It will help you get the most out of your plan — so you can make the most of your retirement.
As a plan participant, you have access to a variety of educational materials. Taking advantage of these materials can help you learn what you need to know about retirement planning and basic investing terms and strategies. You also have access to information about the plan’s specific investments.
You hear a lot about the tax benefits of saving in a qualified retirement plan. But did you know that every time you contribute pretax money to your plan you’re potentially saving twice?*
First, you’re putting money away for retirement. Second, you’re paying less in current income taxes. Over the years, the potential earnings generated by investing the gross amount of your contributions — and not the net or after-tax amount — can really add up.
If you leave your current job, you don’t have to start saving all over again at your new job. You’ll be able to keep your savings growing tax deferred by rolling the vested amount into an individual retirement account (IRA) or your new employer’s plan. Or you may be able to leave the money in your current plan.
Compared to an IRA, 401(k) plans generally have higher contribution limits, allowing you to save more. You also may be able to make catch-up contributions if you’re age 50 or older and would like to boost your savings.
If you had to make a conscious effort to put money away for retirement instead of having it automatically deducted from your paycheck, would you do it? One of the biggest advantages of your retirement plan is that it puts saving on autopilot — and does it in a way that offers potential tax benefits. Tax deferral is not always the optimal approach. It depends on your personal circumstances and your tax bracket. Seek advice from a professional.
* Some retirement plans also offer a Roth contribution option. Unlike pretax contributions, Roth contributions do not offer immediate tax savings. However, qualified Roth distributions are not subject to federal income taxes when all requirements are met.
