Retirement Plan Basics

Making the decision to invest into your company’s retirement plan can be very important to the success of your retirement.  Your employer may offer a 401(k), 403(b) or other types of plans to help you succeed and reach retirement.  They may offer a match, which is very often only achieved if you contribute a certain amount.  That depends on the employer and very often you can speak with your human resources department or check your benefits packet to find out how much your company matches.

Contribution limits have increased from $16,500 in 2011 to $17,000 for 2012.

Retirement Plan Contributions

Saving $1 doesn’t mean you will forgo $1 in your paycheck; unless you don’t pay taxes.  You have to take into account taxes when determining what you can and should save into your retirement plan.  If you are in the 25% tax bracket then forgoing 75 cents will add $1 to your retirement plan.  That’s because you aren’t taxed on those dollars until you withdraw them at a later date.  Think of the taxes you would have paid but instead invested those dollars and the results you may have over the long-term.

Retirement Plan Options

Don’t just choose your retirement plan options the way everyone else in your office does.  Take a risk tolerance and time horizon questionnaire to help you determine your options in your retirement account and review it at least annually to make sure there aren’t any changes.  A good time of year to do this is during open enrollment – that’s because any changes with your plan will most likely be seen at this time.

Retirement Planning beyond Work

Don’t stop just yet!  Saving only into your retirement plan through your employer may not be enough.  Consider additional savings like cash reserves, Roth IRA’s, Spousal IRA’s, and many other choices to help you boost your retirement.  A financial plan can help you understand your situation and what it’s going to take to succeed.