financial plan


The first thing you may want to do when deciding whether you should or shouldn’t invest in a 401(K) is to talk to a financial advisor for help with your financial plan. We’ve looked a few reasons why you should (or shouldn’t) invest, but whether it is a 401(K) or an IRA, the point is to invest in something. Social Security is only meant to supplement your retirement income, and won’t be enough on your own. Generally, you’ll need between 70 percent and 90 percent of your pre-retirement income to live comfortably in retirement. A 401(K) plan could be a good source. Let’s review:

The benefits of compound interest With compound interest, your earnings are put back into your 401(K) so you earn interest on your original principal plus interest. This adds up over the long term and can be a powerful savings tool.

Avoiding minimum investment requirements With a 401(K), you also avoid the minimum investment that other investment vehicles require of other investors. You can put in what you can afford. However, it is always good to find out what the maximum allowable contribution is and try and match it. And if you have a matching plan from your employer, you can leverage that extra money for your monthly contributions.

Watch the high fees Some investments charge really high fees, and any advantages you are getting, such as the taxes you’re deferring with a 401(K) can get wiped out by a percentage or more from an annual expense fee. In that case, it may be better to invest in something like an IRA.

The point is to save for retirement in some manner. Talk to your financial advisor or call Mooney Lyons at 1.847.382.2600 to find out how you can build your retirement savings and minimize risk so you have the ability to save for retirement comfortably.


Top 10 Reasons to Join Your 401(K) Plan.

Ning, David. 5 Reasons You Shouldn’t Contribute to a 401(k). U.S. News and World Report. 16, Mar. 2011


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.