Understanding 401K Plans
401(K) plans are complicated! Today, Paula and Jon are joined by 401(K) expert Tricia Bailey. We're going to cover what employees need to know about their plans.
One of the biggest things plan participants don't understand are the fees associated with the plan. How much do employers pick up vs. how much do employees themselves cover? Because this information is disclosed in a complicated form, listed in percentages, few employees read it. And even fewer understand it! That's why working with a financial planner can be so important. Is the plan a good fit, or should you be allocating more toward other retirement vehicles?
80% of the population uses "set it and forget it" style target date funds, based on their age. Well, everyone's financial situation is different, and one size certainly does not fit all. And two plans, with the same target date, might be managed completely differently by two different companies!
When it comes to fees, Paula mentions not all fees are bad. Sometimes, free means you get what you pay for. Understanding what fees you are paying and what services are available is key to planning your financial future
With the recently passed SECURE Act 2.0, there will be additional vehicles set up to help Americans save for retirement. This will be a welcome change, as the vast majority do not have nearly enough saved for their future. Paula shares the story of a rude awakening for a couple she just met.
For solo entrepreneurs, there are retirement vehicles such as a solo 401(K) and a SEP IRA. Tricia explains how they work. But if you are a very high earner, the contribution limits on these accounts will not allow you to have the same lifestyle in retirement that you have now. She breaks down the numbers and some ways to save a much larger nest egg for retirement.
If you have additional questions, you can reach Tricia Bailey at 248-520-6372. or find email Paula Christine at Paula@PaulaChristine.com. You can also learn more online at www.PaulaChristine.com.
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Reach Paula at paula@paulachristine.com or through her website, paulachristine.com.