David Lerner Associates News

3 Things You Should Know About a 401(k)

Core Facts


Friday, March 22, 2019

When it comes to retiring, it is of the highest importance that you ensure you’ll be able to live comfortably and with peace of mind. Let’s face it, if you don’t have peace of mind, you’re not really retired, you’re just unemployed.

Saving for your retirement is one sure-fire way to keep your mind at ease when the time comes to pack up at the office and head home from your last day of work.

The 401(k) retirement account arose in the 1980s as a supplement to pensions, and the odd name comes from the section of the tax code that governs them. [1] These retirement plans are offered by employers and give workers tax breaks that allow them to save more for the future.

With a traditional 401(k), you invest a portion of your paycheck before taxes are taken out, and pay taxes later on when you take money out. And in some cases, employers match a portion of what you contribute, which is free money that allows your account to grow even faster.

Here are some things to know about your retirement account:

1. A 401(k) is not an investment by itself. It’s more like an account where you hold investments that get special tax treatment. You control how a 401(k) is invested and typically get investment choices that include various funds, such as mutual funds, index funds, target-date funds, or exchange-traded funds.

2. You can move your 401(k) when you leave a job. When you rollover funds into a similar account, such as an IRA or another 401(k) at your new job, you avoid taxes and penalties.

3. Workers over 50 are allowed to contribute more, so they can be ready for retirement. These “catch-up” contributions are $6,000 for 2019. The normal cap for 2019 is $19,000. [2] This cap is evaluated every year and may be increased based on cost of living adjustments. You have until December 31 to max out your plan each year. So if you’re 50 or older, you can put in $25,000 before the end of this year.

How much do you need to save in order to retire? This will vary from person to person. Make sure you have budgeted correctly and think ahead in terms of how you will be spending your money in retirement.  Sadly one in three Americans has nothing at all saved for retirement. [3] This needs to change. If Americans budget better and save more for their golden years, then they will really be golden and not dark with worry and financial shortcomings. 

 

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

Number of views (213)

Author: Sally Falkow

Categories: Retirement Planning Information

Tags:

^ Top

About

Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 516-921-4200 Visit our website: www.davidlerner.com

^ Top

Contact

Jake Mendlinger
Account Manager
Zimmerman/Edelson
516.829.8374 X 232
jmendlinger@zimmed.com

^ Top

Print

x
  • Connect With Us