Guest Author - Olga Marquez

Saving for retirement through an employ-sponsored 401(k) is one of the easiest ways to start investing in you future. You do not need to know much to begin and your plan sponsors should be good enough to get you started, with terminology to setting your goals. Therefore the first rule is:

1) Start contributing now. The sooner you start, the more time you have on your side for flexibility and potential growth. Take care of yourself! We do not know if we will always have social security, nor others to comfortably care for us in the future.

2) By law, you are eligible to start contributing according to your eligibility guidelines. Most plans require one to six months of service prior to the open enrollment date.

3) Beneficiaries! Do not forget to complete your beneficiary form. As a former Investment Advisor and then Benefits Specialist, I have seen complications in payouts due to deaths and divorces and common law marriages not being properly defined. Does the ex-spouse of 15 years ago receive the lump-sum cash-out (for the children, if any) over the most (live-in girlfriend/common-law spouse) of 10 years? Does the distribution get distributed 50/50? The choices are yours, but make them. These are scenarios where the “paper” AKA marriage license might matter. Secure your assets and the time contributed to your relationships, and/or take care of those loved ones who have vested time into your life.

4) Pay yourself first. Your contributions are taken directly from your paycheck and deposited in your account. Your maximum contribution is $11,000 or a maximum percentage of your paycheck.

5) The more money you put away, the faster your money grows. Your account is mobile and you may take it with you whether you roll it into a personal account or into another employer's plan.

6) Employer Match= Free Money. Invest at least to the maximum contribution needed for the maximum match. This is a tax-deferred raise. If you don’t receive a match, invest anyway. If you can invest more than the contribution needed for the maximum match, do it.

7) Your 401(k) contributions are pre-taxed dollars. You do not pay taxes on your contributions until you cash it out. Therefore, you have more money to invest. Taxed dollars can not earn you what pre-taxed dollars may earn you. If you invest a $5 dollar bill into the same investments as a $10 bill at a 15% rate of return, your $5 investment will not yield what your $10 bill will. 15% of $5 does not equal 15% of $10. Consult with your tax advisor for further information.

8) Do not rob yourself by taking out a loan against your retirement savings. Exhaust any and all avenues to attain borrowed loans before you touch your 401(k) savings. With this said, if you need to borrow against your savings, you may do so for medical emergencies, to purchase a home, or for an explained hardship (Hardship Withdrawal). A loan against your 401(k) must be paid back within 5 years.

9) Remember to periodically analyze how your funds are doing, and ask if you may speak with an investment advisor assigned to your plan.

If you have questions about your 401(k), please email me with them, and I will respond to you and include them in my next newsletter.