It’s National 401(k) Day…So What?

September 6th marks a very important holiday: National 401(k) Day. While it may not be a highlight of your year (or your week…let’s be honest), this day can serve as an important reminder to check up on what you’re doing to save for retirement, and how you can improve upon your current plan.

Simply put, The Wall Street Journal writes that a 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account.

These days, 401(k) contributions are a must! Social security may not be enough. It’s widely accepted that Social Security is only meant to provide a modest percentage of your retirement income (possible one-third). As financial consultants, we advise our clients that they’ll need between 70% to 90% of your pre-retirement income to live comfortably in retirement. Where is that money going to come from? A 401(k) plan can be a good source.

If you’d like to learn more about your 401(k) options in person or over the phone, contact us at (310) 402-2511 or greg@trostfinancialconsulting.com.

For now, we put together a list of key info about 401(k)’s that you may want to brush up on:

  • A 401(k) allows you to save for retirement, as well as reduce your taxable income!
  • As of 2019, there is a contribution limit of $56,000, with an additional $6,000 catch-up contribution if you’re age 50 or older.
  • Don’t miss out on employer matching programs…that’s free money people!
  • You can contribute more to a 401(k) than to an IRA.
  • Did you know there is more than one type of 401(k)? There are individual, traditional, roth and employer-sponsored plans.
  • An individual 401(k) – AKA a solo 401(k) – is a retirement plan that can maximize your savings if you’re self-employed. To understand solo 401(k) contribution rules, you want to think of yourself as two people: an employer (of yourself) and an employee (yes, also of yourself). Within that overall $56,000 contribution limit, your contributions are subject to additional limits in each role: As the employer, you can make an additional profit-sharing contribution of up to 25% of your compensation or net self-employment income, which is your net profit less half your self-employment tax and the plan contributions you made for yourself.

By now you should be convinced! Investing in a 401(k) can be a beneficial way for you to save for your retirement years. Contact us to review your current financial plan and discuss.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

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