401(k) planning for employees










As an employee saving for retirement, there may be several other financial goals beside saving for a 401(k) you’ll need to juggle in a lifetime, including buying a home and paying for your child’s education. When managed wisely, your money could potentially go a long way. It’s really all about putting a plan in place and sticking to it. These tips can help get you started:

1. Use long-term investment strategies and start saving now
Using long-term investing strategies for your 401(k) plan will help manage your investment capital as it faces potential risks and losses. Long-term strategies include dividend investing so that you potentially can earn compounded interest that really adds up over the long term. Dividend compounding occurs when dividends are reinvested to purchase additional shares of stock, thereby resulting in greater dividends. Even if you start investing only a little each month, an average annual rate of return can add up over the long run. Keep in mind stock investing involves risk including loss of principal. The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.

2. Maximize 401(k) investment amounts by earmarking a portion of each paycheck
Every 401(k) has a maximum contribution amount, which is really the ideal amount that you want to contribute to your 401(k). The closer you come to making the maximum allowable contribution every year, the closer you will be toward gathering the funds needed to pursue the life you desire when you retire. By taking a predetermined amount from you paycheck, it will be easier to adjust to the difference. It also helps to set goals for daily spending so you don‘t get caught “living up” to your means and spending more than you’ve budgeted for.

3. Taking advantage of your employer’s match to your 401(k)
Matching employer contributions can really, really add up. Always consider making sure that you make a contribution every time which is large enough to receive the employer matching 401(k) maximum contributions. This money is coming at no cost to you, so make sure you get the most you can for your retirement. And just as your employer-sponsored retirement plan offers a tax-advantaged opportunity to set aside money for your later years, certain savings vehicles, such as 529 college savings plans, can provide potentially attractive tax breaks for college savers. Minimizing the taxes you have to pay up front on investments and earnings gives you the chance to make the most of compounding over time.

If you have any concerns about your retirement strategy, please call Mooney Lyons at 1-847-382-2600, or visit us at mooneylyons.com.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice.