Want to be the hero of your future? Entrepreneur and former pro boxer, George Foreman, once said, “The question isn’t at what age I want to retire, it’s at what income.” The good news is you don’t have to be George Foreman to retire comfortably. Investing in an employer 401(k) retirement plan is a low-risk, low-maintenance, and tax-efficient way to help you retire on your terms. Let’s explore the benefits of a 401(k) plan and how investing in one can dramatically improve your retirement position.
Double Tax Break
A 401(k)-retirement plan has advantages that will keep the IRS out of your pocket. Participants can elect to contribute an amount or percentage of their paycheck on a pretax basis. As these contributions are exempt from current federal income tax, it means reporting lower taxable income and potentially paying tax at lower rates. In 2019, the IRS limits the amount of 401(k) contributions to $19,000 annually. However, people 50 or older can contribute an additional sum of up to $6,000, for a total of $25,000. In addition to contributions, any investment income earned by the plan is also tax-free until distribution.
Free Money: Employer Match
Frequently employers offer matching contributions to employees. Many companies match 50% of the first 6% contributed to a 401(k). Let’s say you earn $55,000 annually. In this scenario, if you contribute 6% of your income (or $3,300), your employer will provide an additional $1,650. Some employers will even offer dollar for dollar matches. Whatever the details, an employer match means free money.
Easy, Breezy, Beautiful Payroll Deduction
Last, but not least, 401(k) plans are incredibly easy to manage. How many of us would save as persistently without it being automatically withheld from our paycheck before we could think of something to spend it on? Although many plans offer online portfolio customization, the feature is optional, and the experience can be as hands-off as desired for busy professionals who don’t have the time or desire to learn about investing. Besides peace of mind, a 401(k)-retirement plan, can deliver a professionally managed, diversified portfolio with no minimum investment requirement.
Our financial advisors at Financial Consulting Group use a disciplined approach to financial planning. Let us help you explore how investing in a 401K can dramatically improve your retirement position. Call us today to learn more at (504) 835-1707 or visit www.fcgno.com.