ORLANDO, Fla. (Ivanhoe Newswire) — The average person retires at age 63, but less than five-percent of people have an adequate amount of money saved for their retirement. They say it’s important not to touch your money and let it grow with time, but should you be ignoring it completely? Here are some tips on how to keep your 401(k) on track.
When it comes to your 401(k), it’s good advice to ignore short term setbacks and focus on your long term goals. However, experts say you shouldn’t set it and forget it.
First, consider tax advantages of your investments. Would you rather pay taxes on an annual basis? Or grow tax-deferred in your retirement account? Corporate bonds are taxed at ordinary income rates, while tax-free municipal bonds make more sense in a taxable account. Be aware of tax implications and transaction fees.
Next, constantly consider new choices. For example some companies now offer Roth 401(k)’s which allow you to contribute after tax money and then withdraw it tax free down the road.
Also habitually check your fees. The more you pay, the less your investments are really doing for you. Anything over one-percent should be closely monitored. For example 100-thousand dollars invested that earns four-percent annual return over 20 years and has a zero-point-five-percent fee will grow to more than 208-thousand dollars. But that same investment in the same time span with a one-percent fee only gets you about 179-thousand. That’s a loss of about 29-thousand dollars on your end.
And finally, if you’ve received a bonus at work, or come into some unexpected money, add that in immediately. You’ll forget you ever had it, but your investments won’t over time.
Remember that about 20-percent of your income should go towards your financial priorities which are retirement, savings and debt. The goal is for you to reap maximum benefits from your investments long term. An annual physical is a good idea for you and your 401(k)!
Contributors to this news report include: Gabriella Battistiol, News Assistant; Roque Correa, Videographer and Editor.
