Maybe It's Not A Good Idea To Enroll In Your Employer's 401(k) Retirement Plan

June 21, 2019

Dreamstime

One of the most common pieces of retirement advice is to max out your company's 401(k) contribution. Pulling money out of your paycheck to invest and grow into a bigger number you can rely on for your golden years does make financial sense, but a 401k retirement account is not for everybody. Financial experts say you should be saving 15% to 20% of your annual income for retirement. Manty employers offer matching contributions to your retirement account up to a certain percentage, which means you have to come up with less of your own to make that annual savings goal.  But there are employers who do not offer matching funds.  More immediate is the fact that only 18% Americans have cash savings in an emergency fund to cover anything from a dental bill to a car repair (usually three to six months of your basic family needs). So it may be a safer bet for the short term to build up an emergency fund using money you would use towards retirement.  Once you get that fund established, you're already in the mode of not spending that money, so even if your employer doesn't offer a stellar retirement program you should take a look at it. The average 401(k) offers 29 different investing options, so if you’re seeing far fewer options in your company’s plan, which might be a sign to start a traditional 401k or Roth IRA.  Each has their pros and cons, from fees and maximum contributions to taxes. Its' why you should talk to a financial advisor, even if you are living paycheck to paycheck and here is why.  Some financial advisors earn their fees not from clients, but from banks and investment companies. So they can help you navigate the available funds and help you understand how these plans operate.

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SOURCE: TwoCents

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