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401(k) Investing: How Should You Approach the Options?

Getting the Most Out of Your 401(k) Investing if Your Company Doesn’t Match

The pension plan, once the go-to retirement strategy for the average American worker, is not a common option anymore. Today, many individuals turn to 401(k) investing to help in saving for retirement. It’s not uncommon for employers to match employee contributions to the 401(k) up to a certain percentage. But what should you do if your company doesn’t offer a match?

Surprisingly, American Investment Planners puts the number of companies that don’t offer a match at around 42 percent. If you’re working for a company that doesn’t offer a matching contribution, there are few key considerations:

·         First, know that 401(k) investing is an appealing option in saving for retirement, regardless of the match.

·         Second, your company’s plan should charge fees that are entirely reasonable and investment options that are diverse.

·         Third, contributions to the plan are made automatically, as you instruct your plan administrator. There is typically no option to skip one month should cash flow become tight.


If you fall into the classification of a higher income household, 401(k) investing is often an attractive option, as contributions may be deductible from your taxes. An added benefit for high income earners is the contribution cap - $18,000 a year in 2015 and 2016 (it should go up in the ensuing years). Individual retirement accounts (IRAs), on the other hand, are limited to $5,500 a year for workers 49 and younger and $6,500 a year for workers 50 and older.

There are times when the IRA is an option that needs to be considered, particularly when it comes to tax planning. Some investment advisors say you should not be so focused on current taxes and instead to think about tax rates at the time of your retirement. If the rates are likely to increase over time, your money might be better off in a Roth 401(k) or Roth IRA because the money is taxed going in rather than when it comes out in retirement. 

According to Vanguard Group, around 56 percent of employers offer a Roth option in the 401(k). You should speak to your investment advisor about this option if it is available to you. If it is not, your advisor might suggest that you put the bulk of your retirement savings into a Roth IRA.  Of course, there are many other considerations when deciding whether to contribute to a regular 401(k) or IRA or a Roth, so be sure to ask an advisor if you’re unsure.

You have options in your investments for retirement, and at Family Investment Center, our team wants you to know what those options are. We have experience with individuals and families at all life stages, and we know how to communicate in a comfortable, client-first setting. Contact us today and let’s talk about what’s next for you and your family.


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