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Do You Know Your Options for 401(k) Investing?

Yes, You Can Expand Your Approach to 401(k) Investing


If your company offers a pension plan, you’re a rarity. While that was the most popular retirement planning tool for decades, not many organizations offer pension plans today. The tool that’s now in its 40th year and has taken the place of pensions is, of course, the 401(k) for investing.

401(k) investing has great benefits. For example, in 2018, your contributions are tax deductible up to $18,500. If you’re 50 or older, the IRS allows you to contribute $24,500 a year – tax deductible. Another benefit to the 401(k) investing method is that many employers will match contributions to a certain percentage (it varies, but rarely goes above 6 %).

What Are Your Options?

While the 401(k) has been around since 1978, a Roth 401(k) option was added in 2006. The traditional 401(k) investing model allowed for tax deductions upon contributing, but in retirement, those funds are taxable. The Roth model does not allow deductions on your contributions. Rather, you pay taxes up front, and then in retirement as you withdraw money, all of it – contributions and earnings - comes to you without a tax bill.

For employees in a lower tax bracket, the Roth model makes a lot of sense, because they can potentially see a big tax benefit upon retirement and are likely not depending on current tax deductions.

Another benefit of the Roth 401(k) is that there is no income limit. Plus, the traditional Roth IRA caps contributions at $5,500, or $6,500 for those 50 or older.

Getting the most you can out of your money should be a priority, but it can be difficult to do without professional guidance. That’s why it’s smart to bring a fiduciary in to guide you through all the options, and there are many more than most investors know about. More options mean more ways to get to the freedom you want, whatever that looks like.

At Family Investment Center, we’ve made it our mission to understand all the possibilities that exist for our clients. We’ll listen to you as you talk about your goals, and we can plan your route in meeting them. Contact us today and let’s discuss your options.

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