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401k Plans: Retirement Basics

Available through CUSO Financial Services, L.P.

 

Whether you’ve just entered the workforce or are actively employed, you likely have considered saving for retirement. Even if retirement is many decades in the future, a successful future could depend on developing a retirement strategy early.

So, where to start? Many employers offer retirement plans, like 401ks. If this is an option for you, now is a great time to learn about your options. Don’t worry If you’ve never heard of 401k. We created this blog post to help you make smart financial decisions to achieve your retirement goals.

What is a 401k?

A 401k plan is an employer-sponsored retirement savings account that allows employees to contribute a portion of their salary to long-term investments. All contributions and investment earnings aren’t taxed until the money is withdrawn—usually while in retirement. Employer 401k plans have advantages and disadvantages, including:

    • Employer Matching—some employers will match employees’ annual contributions up to a specified amount. This is an excellent opportunity to claim free money toward retirement!
    • Limited Flexibility—employer-sponsored plans often have pre-selected investment options that might not meet your needs or goals.

401ks aren’t your only choice when saving for retirement. That’s why it’s important to understand your options and decide what will help you achieve your goals.

When can you withdraw?

Most people wait to withdraw money from their retirement plans until they’ve retired (usually between 62-65). However, you can begin withdrawing from a 401k as early as 59 ½. If money is pulled out early, you’ll be responsible for a 10% tax penalty unless the early withdrawal is due to an exception.

What happens if you leave your employer?

If the day comes when you find a new job opportunity, you will have to decide what to do with your soon-to-be former employer’s 401k plan. A few options to consider include the following:

    • Leaving it with your current employer
    • Transferring it to your new employer’s 401k plan
    • Rolling it into an IRA.

A financial advisor can help you pick a plan that best fits your financial goals. Check out this blog post to learn more about the benefits of a 401k rollover.

When should you start saving?

The road to retirement is a marathon, not a sprint. However, it may not be easy to see the finish line right now. Starting early will give your nest egg the time it needs to grow. As your income increases over time, you’ll likely want to increase your contribution when possible. Check out this blog post to learn more about the importance of starting early.

We are dedicated to helping our members achieve financial success. Check out the Golden Years playlist on Achieve, our financial wellness program to learn about retirement. For a more comprehensive review of your retirement plan, contact CFS* Financial Advisor, Shanel Dubique at Shanel.Dubique@atriawealth.com.

 

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk, including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Before deciding whether to retain assets in an employer-sponsored plan or rollover to an IRA, an investor should consider various factors including, but not limited to: investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock.

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