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Tips On Employer-provided Retirement Plans

Having a current employer with a retirement plan that you can contribute to, is one of the best avenues for retirement.

In managing this type of Investment account, please consider the following tips from us:

1) Maximize the amount you put into this plan: we love this plan because your money is taken out of your paycheck before it gets to you and your checking account (where it may be spent). Whenever you can automate a plan, so it just happens every paycheck, the better.

2) Many companies match your contribution up to 6 %: find out the limit that your company will match, if it does match, and try your darndest to get to that matching %. After all, if you hit that amount you can take advantage of all the company $ available to you; if you don?t, you are missing out on money available to you -for free- from your company. What?s the catch? Usually the company matching contribution is only available to you if you leave the company after you have stay at the company 5 years before moving on and therefore become vested; find out the rules on when you own (vest) the company contributions and if leaving the company, leave the day after you vest some/all of the company?s contributions. Your contributions into the plan are always yours.

3) The contributions to this plan are pre-tax which means your taxable wages that you report on your tax return will be reduced by this amount. This is a great deal (verify that your employer plan allows for this Pre-tax contribution), since the less reportable earnings means less taxes owed to the IRS/State.

4) As this money continues to grow inside this retirement account, you do not report this growth/earnings on your tax return. It?s called Tax Deferred. You will pay tax later when you pull it out but not now or at any time as it continues to grow. And it certainly is going to grow a lot faster if there is no taxation on it until LATER ON.

5) Just because the company is only matching you up to 6% (or whatever % of your gross salary) does not mean you have to stop there. We recommend putting into the plan the maximum you can afford. Many companies allow up to 15% contribution from the employee (paycheck), or even higher.

6) Always, always review your investment choices (at least twice each year) to be certain it is growing at an optimal rate and you are not taking inordinate risk. Never put all your eggs in one basket which means be sure you have apportioned your money among the different investment choices available to you. Have a retirement plan expert at your job assist you, or another financial expert review these investment choices; it?s critically important that the money get into the plan AND invested correctly.

7) Many company plans allow you to borrow from this retirement account for home purchase or an emergency; we do not encourage this. Of course if an emergency occurs it?s nice to know this money is available (check your plan to be sure borrowing is allowed), but remember that if you take $ from your retirement you are impacting your future -that?s why is so important to build and maintain an Emergency Savings account.

8) Did you know that you may be able to contribute to your retirement account at work AND also contribute to a second retirement account called an IRA (Individual Retirement Account)? If your cash flow allows for this secondary contribution, do it. You may qualify for a ROTH IRA or a Traditional IRA -ask an expert for guidance or read our retirement basics educational piece on this. Also, please keep in mind that even if your spouse (if applicable) does not work she/he may be eligible to contribute to this IRA or ROTH IRA. Again, just check with an expert or read our information. Why do we want you to add this additional contribution? The more money you get invested toward your retirement account and the sooner you do this?.the sooner you will reach your financial retirement goal, and secure a comfortable and financially relaxed future; and be able to quit your job (if that is your wish!)