At Simply Money Advisors, we often discuss the pros and cons of a 401(k) plan. While we believe a 401(k) plan may not be the best investment vehicle, it is the most common way people save for retirement, so you should take full advantage. Here are a few benefits to participating in your employer’s 401(k) plan.
During a working career, the average worker changes jobs about 11 times. That’s a lot of old 401(k) accounts! If you’re switching jobs, or have some old 401(k)s floating around, you technically have four options – though at Simply Money Advisors, we only think three are viable.
There are a lot of ways you can save money for the future. Some of the most common include a traditional 401(k), Roth 401(k), traditional IRA (Individual Retirement Account), Roth IRA, HSA (Health Savings Account), and even “taxable” investment accounts. Whew!
So how should you prioritize your saving to be the most tax efficient? First, a few definitions:
Your 401(k) is terrible.
We don’t necessarily mean your particular plan is terrible. We mean the whole concept of a 401(k) is just rotten – and it’s doing you an injustice. It’s a voluntary system that’s turned into a failed experiment.
If you have a 401(k) through work, it’s probably the largest chunk of money you have dedicated to your retirement savings. So you better be treating it right! As the year draws to a close, we at Simply Money suggest carving out a few minutes to take a look at your account and ask yourself these questions:
First the good news: when it comes to 401(k) plan participation, men and women are on the same footing. According to research from Aon Hewitt which examined the retirement saving and investing behaviors of approximately 3.5 million defined contribution participants, approximately 79 percent of both men and women are enrolled in their respective 401(k) plans.
When it comes to 401(k)s, you might be surprised how much effort is dedicated to increasing participation and contributions. As the primary means of saving for retirement, researchers and plan designers are constantly looking for ways to motivate you, the employee, to fully utilize their 401(k) plans regardless of short-term market or economic swings.