When negotiating the ever-changing financial landscape, many Siemens employees may be uncertain of the wisdom of planning their retirement solely around their 401K and social security. Certainly they have reasons to be cautious. Disappearing pensions and the questionable effectiveness of social security has many investors, including Siemens employees, re-evaluating 401K plans. Given the current investment climate, is a 401K plan enough?
The answer to this question is yes and no. At one time, 401K plans were viewed as the main source of income during retirement, part of a three-pronged approach to savings along with social security and defined benefit pension plans. Taking full advantage of 401k plans by maximizing corporate matching today is a no-brainer. If you’re relatively close to retirement, this strategy will likely serve you well. For those of us with 10 to 15 years left to work, maybe not so much.
That’s because if you’re a Siemens employee, or any employee benefitting from a matching plan, what you don’t want to do is passively invest in your 401k plan and hope for the best. Behind every big plan are the fund issuers, who more often than not choose investments based on their own interests. And their best interests might not be in the best interests of you. The good news—you may have other available options within your 401k for investing, so it definitely pays to contact your plan administrator to determine your opportunities. Armed with this information, your financial advisor can help you sift through all of these options to help you identify the most suitable investments to manage the risk exposure within your plan.
Building on your investment strategy with a diverse mix of investments is a nice way to round out your portfolio. If you are risk averse, there are many options that offer the flexibility, and return potential, without requiring a lot of financial expertise. Consider the role taxes pay in 401k investing. While it is true that you will likely not need the annual income you did when working, and your tax bracket will likely be much lower in retirement, it’s always good to be prepared for fluctuating tax rates. Having a well-rounded portfolio that includes a 401k and other investments is a solid plan for the future.
When it comes to retirement strategy, it’s important to have a professional in your corner. You can call Mooney Lyons at 1-847-382-2600 or visit us at: mooneylyons.com. Our managers can help you sift through the complexities of financial planning to help ensure your future is bright.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.