When it comes to planning for retirement, perhaps we should pay heed to an old saying, “If it’s going to be, it’s up to me!” Now more than ever, the responsibility for building a retirement nest egg is on the worker’s shoulders. So where do you begin? Paul Fain, President of Asset Planning Corporation recently appeared on WBIR, Knoxville’s NBC affiliate to look at your money and your retirement security.
PAUL, HOW HAS THE RETIREMENT LANDSCAPE SHIFTED FOR TODAY’S WORKERS?
The traditional pension plan is going the way of the Dodo bird – virtually extinct. Other folks are worried about the long-term viability of the Social Security trust fund. As a result of factors like these, the onus of financial security has shifted to employee wealth accumulation.
ARE 401(K) PLANS NOW THE MOST IMPORTANT RETIREMENT TOOL?
Indeed. Named after the tax code that describes it, a 401(k) plan has important tax benefits: it reduces taxable income and grows tax-deferred. To reward participation, many 401(k) plans offer company matching contributions. Investors typically have a wide list of self-directed investment options.
WHAT IS THE BEST WAY TO MANAGE A 401(K) ACCOUNT?
- Start on Day 1 of eligibility;
- Strive to contribute at least the matching amount (ex: 3-6%);
- Set a goal to build your contribution to 10% or more: Increase over time via raises and bonuses.
WHAT ABOUT INVESTING – WHERE TO BEGIN?
- Include stocks: key to long-term growth;
- Determine your portfolio risk tolerance: conservative, moderate, aggressive;
- Choose a self-directed custom asset allocation or select a managed fund such as a Target Date Fund.