Saving for Your Retirement: 401(k) Plans

Key strengths

  • You receive “free” money if your contributions are matched by your employer (subject to your plan’s vesting schedule)
  • You decide how much to save (within federal limits) and how to invest your 401(k) money
  • Your regular 401(k) contributions are made with pretax dollars
  • Earnings accrue tax-deferred until you start making withdrawals, usually after retirement
  • Your Roth 401(k) contributions (if your plan allows them) are made with after-tax dollars; there’s no up-front tax benefit, but distributions of your contributions are always tax free and, if you satisfy a five-year waiting period, distributions of earnings after age 59½ or upon your disability or death, are also tax free.
  • You may qualify for a partial income tax credit
  • Plan loans may be available to you
  • Hardship withdrawals may be available to you, though income tax and perhaps an early withdrawal penalty will apply, and you may be suspended from participating for up to six months
  • Your employer may provide full-service investment management
  • Savings in a 401(k) are exempt from creditor claims in bankruptcy (but not from IRS claims)

Bear in mind…

  • 401(k)s do not promise future benefits; if your plan investments perform badly, you could suffer a financial loss
  • If you withdraw the funds prior to age 59½ (age 55 in certain circumstances) you may have to pay a 10 percent early withdrawal penalty (in addition to ordinary income tax)
  • The IRS limits the amount of money you can contribute to your 401(k)
  • Unless the plan is a SIMPLE 401(k) plan, a safe harbor 401(k) plan, or the plan contains a qualified automatic contribution arrangement (QACA), you may have to work for your employer up to six years to fully own employer matching contributions

Investing for Retirement

Keep in mind…

  • A well-diversified portfolio can help balance risk
  • The earlier you start investing, the more you can contribute over the course of your working lifetime
  • By starting early, your investments will have a longer period of time to compound
  • With a longer time frame, you will have a larger choice of investment possibilities

What to do…

  • Assess your risk tolerance
  • Determine your investing time frame
  • Determine the amount of money you can invest
  • Choose investments that are appropriate for your risk tolerance and time horizon
  • Seek professional management, if necessary

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Disclosure Information — Important — Please Review

Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value. NOT FDIC-INSURED. NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.

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