Asset Protection
Contributing to a 401(k) or a similar qualified plan is a popular and tax-efficient way to save for retirement. As of 2023, 70 million American workers were actively contributing to the country’s 710,000 plans. In 2024, you can contribute up to $23,000 and $30,500 if you’re over 50. If you can’t maximize your contributions, aim to contribute enough to receive your employer’s match, as it’s equivalent to free money that can grow tax advantaged.
Our Philosophy & Approach to 401(k) Management
1. We see your 401(k) in the context of your entire financial picture
You’ll be confident that your 401(k) is working in synergy with your other retirement savings and sources of retirement income.
2. We use our experience to optimize yours
We share our knowledge of retirement planning, in general, and employer-sponsored plans, in particular, so you can make well-informed decisions based on a thorough understanding of your options.
Optimal use of your plan requires you to actively manage your account, including your investment mix and contribution strategies. Decisions such as whether to invest in pre-tax or post-tax dollars are particularly important as you approach retirement and your balance grows. Periodic rebalancing is also crucial to maintain your chosen asset allocation. If your plan offers automatic rebalancing, taking advantage can help you avoid making errors.
For asset preservation and income generation, many pre-retirees adjust their portfolios by reducing equity allocations and increasing fixed income and guaranteed return products. It’s also important to monitor your progress toward your retirement savings goals. Doing so may prompt necessary actions like catch-up contributions after age 50.
Managing your 401(k) nest egg becomes more complex when it needs to generate retirement income. Popular options that exist within and outside the plan include IRA rollovers, which can offer greater flexibility and control for some, as well as annuities for lifetime income guarantees.*
Generally, borrowing money from your 401(k) isn’t advisable as it can jeopardize your long-term retirement funds and lead to significant taxes and penalties. You don’t want to be left wishing you still had that money when looking for retirement income.
How We Can Help You Optimize Your 401(k)
Let Freedom First Retirement Design guide you in optimizing your 401(k) with a holistic planning approach that considers your overall financial picture and goals. We provide tailored recommendations based on our knowledge of your needs and our experience helping thousands of clients who depend on their plan for savings and retirement income.
We’re here to help you make informed decisions throughout your plan’s life, including performance monitoring, investment choices, allocation balancing, and tax-efficient income strategies. As you near retirement, we’ll help you evaluate options like Roth IRA conversions, IRA roll-overs, and annuities for preserving and generating retirement wealth. We use our expertise to simplify these processes, saving time and improving performance.
*Fixed index annuities carry the risk, however unlikely, of the issuing insurance company’s default and therefore their returns are dependent, in part, on the solvency of the issuing insurance company.
