Investing for Your Future

Does your employer provide a retirement plan? If so, say retirement experts grab it! Employer-based plans are the most effective way to save for your future.

Study your employee handbook and talk to your benefits administrator to see what plan is offered and what its rules are. Read the summary plan description for specifics. Plans must follow federal law, but they can still vary widely in contribution limitations, investment options, employer matches, and other features.

Join as soon as you become eligible.

Put in the maximum amount allowed.

If you can’t afford the maximum, try to contribute enough to maximize any employer matching funds. This is free money!

Study carefully the menu of investment choices. Some plans offer only a few choices, others may offer hundreds. The more you know about the choices, investing, and your investment goals, the more likely you will choose wisely.

Many companies match employee contributions with stock instead of cash. Financial experts often recommend that you don’t let your account get overloaded with company stock, particularly if the account makes up most of your retirement nest egg. Too much of a single stock increases risk.

Plan fees and expenses reduce the amount of retirement benefits you ultimately receive from plans where you direct the investments. It’s in your interest to learn as much as you can about your plan’s administrative fees, investment fees, and service fees.

Don’t borrow from your retirement plan before retirement unless absolutely necessary. Borrowing reduces the accounts earnings. Also, if you fail to pay back the loan, you could end up paying income taxes and penalties. As an alternative, consider budgeting to save the needed money or pursue other affordable loan options.

Avoid permanently withdrawing funds before retirement. This often happens when people change jobs. Pre-retirement withdrawals reduce the ultimate size of your nest egg. In addition, you’ll probably pay federal income taxes on the amount you withdraw. In addition, you may have to pay state taxes.


Posted by Ardent Editor on Jan 19 2007 in Investment

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