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April 2019

Jennifer Ready, Vice President, Retirement Plan Services, HK Financial Services

 

Retirement is one of the biggest milestones in one’s life, yet so many of us don’t pay much attention to our 401(k) accounts. It is not unusual to hear individuals say they toss aside their 401(k) statements because they feel like they can’t do anything about it. That couldn’t be further from the truth. Reviewing your contributions and investments at least annually is like taking care of your health with an annual check-up with your physician. Taking the time to focus on your health gives you the opportunity to adjust your eating or exercise habits to ensure your body can sustain you for the years to come. The same could be said for your retirement accounts. It is equally important to make sure your retirement savings will sustain your lifestyle for years to come.

Many individuals set up their 401 (k) account when they are initially hired or become eligible for their employer’s retirement benefit. This is a great first step, but so much more attention is needed during your working years to ensure you are prepared to retire when and how you want to. Ask yourself – Does your retirement account need a check-up? How long has it been since you increased your contribution amount or updated your investment allocations? Are you on track to meet your retirement goals? Give yourself peace of mind knowing your retirement planning goals are still meeting your needs. Below are some suggestions to consider:

Increase your contribution amount
The limit for 401(k) plans for 2019 is $19,000. If this is significantly higher than the amount you are contributing today, consider increasing your contributions a few times during the year if your plan allows it. That way, the difference in your paycheck may not be so noticeable. If you are able to increase up to the full $19,000 without creating too much of a pinch on your cashflow, this is the best way to reduce your taxable income. Plus, you’ll have more opportunity to grow your savings!

Roth vs pre-tax deductions
If you are currently in a lower tax bracket, consider taking advantage of your plan’s Roth feature rather than selecting pre-tax deductions. A Roth feature allows you to grow your savings over your working years and avoid taxes on your savings later.

Take advantage of your company’s match
Make sure you are contributing enough to your plan to take advantage of your company’s match. This is extra money that will grow over time to help you build up your account. Don’t leave this money on the table. It is an added benefit that your employer provides as an incentive for you to save for your retirement.

Playing catchup
If you are age 50 or older, you may contribute an additional amount of $6,000 (in 2019) to help you make up for time out of the workforce or simply to boost your savings later in your career.

Plan loans
Some retirement plans offer the opportunity to take a loan. Resist the urge to borrow from your future. In doing so, you’ll lose the effect of compounding interest with the unpaid loan balance.

Checking for alignment
Review the investments you are putting into your retirement. Do they provide you with the right mix of stocks and bonds to ensure continuous growth over your working years? Some plans automatically rebalance to keep your selected mix of investments in line, but others don’t. You may need to adjust your investments to keep them aligned with your financial goals and risk tolerance.

With all of these tips on how to make your retirement savings work for you, it is equally important not to make emotional decisions with your retirement investments. Understand the markets may bounce around, but your retirement investments are meant to handle the ups and downs over the course of your working years. Resist the urge to make hasty decisions with your investments based on short term market fluctuations. Market cycles come and go, and your savings should continue to grow.

Take some time and do some spring cleaning with your retirement plans and make sure you are set up for the growth you need to achieve your retirement goals.

Talk to an HK Financial Services financial planning consultant to help determine the best plan for you.

 

Advisory accounts and services are offered through HK Financial Services (HKFS), a SEC-Registered Investment Adviser.  Plan administrative services provided by HKFS. Brokerage accounts and services for transaction-based fees are offered through Registered Representatives of ProEquities, Inc., a Registered Broker-Dealer, Member FINRA and SIPC. HKFS and ProEquities are separate legal entities. 8327373