There’s a total of $7.3 trillion in America’s 401(k) accounts—a figure that’s more than doubled over the last ten years. Since so many people rely on this kind of retirement account to cover the bulk of their retirement savings, we think it’s a must to understand their features and benefits.
Although we don’t recommend checking your 401(k) too frequently, take some time to answer the following questions:
What are you currently contributing to your 401(k) plan? Is it enough?
If you’re under 50, you can contribute up to $20,500 annually. If you’re 50 or older, the maximum contribution is $27,000 per year. Are you taking advantage of these contribution limits?
Learn what the company is willing to match. Then, contribute up to maximum percentage. For example, if your employer is willing to match up to 3% of your salary, don’t leave this “free money” on the table.
Roth contributions are after-tax contributions. Your money can grow tax-free, which means you won’t have to pay taxes on it when you access it in the future.
As with a traditional 401(k), the maximum contribution for a Roth 401(k) is $27,000 per year if you’re over 50. Plus, you can split your contributions between a traditional and a Roth 401(k).
Have you already contributed the maximum allowable amount to your 401(k) retirement account? Ask your employer if there’s an after-tax contribution option. If so, you may be able to contribute an additional $40,500 that you can roll into what’s called a “mega backdoor Roth.”
Consult your tax or financial advisor if you’d like to go this route. Creating this type of account is complex, and if you don’t know what you’re doing, you could be hit with some unexpected taxes.
Most people are aware that they can move a 401(k) to a traditional IRA when they leave the company. But some firms allow in-service rollovers. An in-service rollover lets you rollover your existing 401(k) to an IRA while you’re still working for your current employer.
An IRA provides more investment options than are available in your company 401(k) – similar to a traditional brokerage account. But unlike brokerage accounts, IRAs have the advantage of potentially lower fees, easier access, and better control over your investments.
And after you complete the in-service rollover and make after-tax contributions to the IRA, you’ll then be able to convert those contributions to a Roth IRA with no tax consequences.
Know what you’re holding in your retirement account—like you would with any other type of investment account. Are the holdings appropriate for your age, risk tolerance and investment objective? How do they complement or work with your other outside investment accounts?
Wouldn’t it be nice to know if your 401(k) is set up in a way that works best for your goals? The Alpha Wealth Group wants to give you that peace of mind. We’ll do a deep dive into the individual investments within your portfolio, tell you which funds are doing well, which are holding you back, and how you can optimize the account’s performance. There’s no cost to you and no further obligation.
And if you’d like to see the broader picture relating to your financial success during retirement, we also provide a complimentary retirement roadmap. We’ll review your financial statements, discuss your goals, and develop a plan that will fit your needs.
For more information or to schedule a complimentary consultation, contact us here. You can also reach Tom Fortino at (630) 519-4742 or firstname.lastname@example.org.
We look forward to working with you.
Investment advisory services offered through Retirement Wealth Advisors, LLC (RWA), a registered investment advisor and an affiliate of Brookstone Capital Management, LLC. RWA and Alpha Wealth Group are independent of each other. Insurance products and services are not offered through RWA but are offered and sold through individually licensed and appointed agents.