Don’t Overlook This Information About Your 401(k)

A 401(k) is one of the most popular retirement plans in America. Nevertheless, we’ve found that many workers sign up to participate in their company’s 401(k) program without reading all of the fine print. While that’s understandable—401(k)s can be a little difficult to understand—you need to know some basic facts before enrolling.

Thankfully, we’re here to help. This post will cover the top things to know about your 401(k).

What are some important facts about a 401(k)?

You should understand these facts before you sign up to contribute towards your 401(k) each month. Knowing this info will ensure you’re putting your money in the right place:

  • Your company probably has a contribution match: Many companies participate in an employee matching program, where they’ll match your retirement contributions up to a certain percentage or dollar amount. Check to see what percentage your company will match, and make sure you’re participating in the matching program.
  • You have many investment options: Your company likely has predetermined investment options for all 401(k) participants. But before you opt into these target date funds (TDFs), look at all of your options. Depending on your age or financial situation, a TDF might not be the best place to keep your money.
  • Investment options have different costs: Another one of the top things to know about your 401(k) is that each 401(k) has associated investment fees. Some investments are more expensive than others, and these fees can get pricy. Thankfully, the U.S. Department of Labor requires 401(k) providers to disclose these fees as soon as you enroll in the program. Your human resources director should have more info about the fees.
  • You can change your investments: One of the best things about a 401(k) is that you’re not locked into the investments you make upon enrollment. Rebalancing is the process of buying or selling different assets in your portfolio. Failing to rebalance periodically could mean you’re not getting the most out of your 401(k). Depending on your 401(k) provider, you may even be able to do this online.
  • There are contribution limits: The IRS sets annual limits for how much we can put in our 401(k)s. The limit is adjusted each year for inflation, so it changes every year. In 2021, the limit is $19,500 for anyone under 50 and $26,000 for anyone 50 or older.
  • You can withdraw money early: The government makes us eventually withdraw from our 401(k) plans. For most people, that age is 72. But if you’re in a tough spot and need some cash, you can withdraw from your 401(k) before you retire. Just be mindful that there are financial penalties for doing so.

Get the 401(k) support you need

If you’re interested in setting up a 401(k) for yourself or you need a team to look after your money, turn to our experts at Fiduciary Advisors, Ltd. Our professionals are dedicated to helping you navigate through the tricky financial world. Request a proposal today or reach out to learn some additional important facts about a 401(k).