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Tips to Help Increase 401(k) Account

 Posted on September 03, 2015 in Estate Planning

increase 401(k) account, Illinois Estate Planning AttorneyOne of the primary sources of assets utilized in estate plans comes from 401(k) plans that people set up through their employers. The funds that accumulate in these accounts are often the ones used to fund living trusts and other estate planning options later in life.

Many employers offer 401(k) plans as a way for employees to plan for retirement. Typically, an employee decides what percentage of his or her pay he or she wants to put towards an account. An employer automatically deducts that amount from each paycheck and deposits it in the employee's 401(k).

An account is managed by a plan administrator—usually a brokerage firm or mutual fund company. However, an employee decides where he or she wants his or her funds invested. Often, an employer will offer a matching contribution. The more an employee can fund his or her 401(k), the more financially secure he or she will be for retirement.

Financial advisors suggest the following tips as ways to help increase the amount of your 401(k):

  • Whether you have a choice or not, it is better to have funds automatically deducted from each paycheck. "Out of sight, out of mind," is an apropos saying in this instance because if you do not have the funds in hand, you will not be tempted to spend on something else;
  • It is important to increase the amount of your contribution as your pay increases, with raises and/or bonuses. Check to see if your plan offers automatic escalation;
  • Most plans have a default savings rate. The rate is usually 3 percent, which is most likely not enough to fund your retirement. Make sure you pick a default rate which will get you to your retirement goals;
  • Besides taking advantage of matching contributions from your employer, check to see if non-matching contributions are offered. These may be in the form of a percentage of company profits or the amount of your salary;
  • Many plans allow you to defer paying taxes on the money you are depositing in your account until the time you actually withdraw those funds;
  • When it comes to choosing which funds to invest in, choose the ones which have the lowest expense ratio amount. The amount you are being charged can be found in the annual disclosure statement you receive from the plan administrator; and
  • Remember that if you take an early withdrawal from your account (before the age of 55); there is a 10 percent fee that will be deducted. There is also a 50 percent tax penalty if you fail to take money from the account after the age of 70.5 years.

When planning for the future, it is important to sit down with an experienced DuPage County estate planning attorney to make sure that you and your family are protected. Call 3630-665-2500 today to schedule your consultation.


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