The Informed Investor

For many people who have a 401(k), contributing a small percentage of each paycheck toward it is about all the knowledge they have about the retirement plan. What they don’t realize is that they have an incredible tool at their fingertips that can help them meet their future financial goals.

Your 401(k)can be just another deduction from your paycheck or it can be a smart way to plan for your retirement. The difference comes when you know how to best utilize it.

Here are 6 helpful things to know about your 401(k) plan.

1. Learn About Your 401(k)

Gaining knowledge is the best starting point for creating a bright future.
Before you can do anything, you have to know whether or not you even have a 401(k). Many employers automatically enroll new employees in a 401(k) plan. Some may provide you with paperwork, discuss it and answer any questions. Others just do it, and you don’t even realize it until you see a deduction on your check.
You can’t make the most of your 401(k) plan if you don’t understand the specifics of your plan, the company’s contributions, and how to manage your own contributions.

2. Your Contributions are Tax Free

Though there is no cap on how much you can contribute from each check, but the government does place a cap on the amount you can contribute each year.  The limit in 2021 is $19,500 if you are under age 50. If you are 50 or over, you may contribute an additional $6,500 in 2021. This is called a “Catch-Up” contribution for those age 50 and over. You can make your catch-up contribution spread out over the year or in one lump sum at the end of the calendar year. The rules relating to catch-up contributions are complex and your limits may differ according to provisions in your specific plan. Contact your plan administrator to find out whether your plan allows catch-up contributions and how their catch-up rules apply to you.

3. The Benefits of Employer Matching

If your employer offers contribution matching, why not take advantage of this free money? Generally, most employers will offer to match 50% of the amount you contribute up to 6% of your pay. Typically, employers contribute 3-6% in matching funds.

401(k) plan contributions by your employer are often part of your salary compensation so take advantage of it.

4. You Can Choose How to Allocate Your Contributions from Your Plan’s Choices.

Employers or a company’s investment committee determine which investment choices to make available to employees. You then get to choose from those options. Most 401(k) plans will have a choice of money-market, target-date funds, low-cost index funds, domestic stock or bond funds, and international funds to choose from.

Take time to review the options offered in your plan to ensure you allocate your contributions in a way that will meet your future goals considering your age and your appetite for risk versus more steady investment choices.

5. Emergency Access to Cash in Your 401(k)

By design, a 401(k) is meant to be used as a retirement planning tool. However, life sometimes gets complicated, and having the ability to access this cash can be a lifesaver. Just know that it doesn’t come without a penalty – usually 10% of the amount withdrawn unless you are at least 55 years of age.

Borrowing from your 401(k) is also an option if your plan allows it. You will have to pay a fee and you will almost always be charged interest, but the interest you pay goes into your account. With most plans you repay the loan through payroll deductions. Normally, the loan must be paid back over five years. That is the longest repayment period the government allows. However, if you borrow from your 401(k) for the purchase of your primary residence some plans allow you to repay the loan over 25 years. If a participant has no other plan loan in the 12-month period ending on the day before you apply for a loan, they are usually allowed to borrow up to 50% of their vested account balance up to a maximum of $50,000*.

While it is best not to touch the money in your 401(k) plan before retirement, having this available in case you need it can be helpful.

6. Retirement Withdrawals Must Begin at Age 70 ½

The IRS states that Required Minimum Distributions (RMDs) must commence at the age of 70 ½ years. The distribution amount is based on life expectancy. So, as you get older, the higher your distribution amount will be. Contributions to retirement plans (unless it is a Roth 401(k) or a Roth IRA) are exempt from taxes therefore the money you withdraw from these plans when you reach 70 ½, and thereafter, is taxable as ordinary income. For those looking to avoid this required minimum distribution, continue working. Even if you are over the age of 70 ½, you don’t have to withdraw money from your 401(k) plan as long as you are still employed.

Learn More About Retirement Planning With ICC

Having a team of financial advisors working hard to create a retirement planning strategy that works for you is exactly what you will find with ICC.

If you have $5 million or more of investable assets, please visit our website www.iccnv.com or call us at 702-871-8510 to learn more about how we can help you achieve all that is important to you and your family.

IMPORTANT DISCLOSURE INFORMATION

The Investment Counsel Company of Nevada (“Company”) is an SEC registered investment adviser located in Las Vegas, Nevada. Company may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements. Company’s web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Company’s web site on the Internet should not be construed by any consumer and/or prospective client as Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Company with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of Company’s current written disclosure Brochure discussing Company’s business operations, services, and fees is available from Company upon written request. Company does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Company web site or incorporated herein, and takes no responsibility, therefore. All such information is provided solely for convenience purposes only and all users
thereof should be guided accordingly.

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s).

Certain portions of Company’s web site (i.e. newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Company (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Company, or from any other investment professional. Company is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting or tax advice.

Please Note: Limitations: Neither rankings and/or recognition by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Investment Counsel Company is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers (see below as to participation data/criteria, to the extent applicable). Unless expressly indicated to the contrary, Investment Counsel Company did not pay a fee to be included on any such ranking. No ranking or recognition should be construed as a current or past endorsement of Investment Counsel Company by any of its clients.

ANY QUESTIONS: ICC’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including the criteria used for any reflected ranking. Please review Important Disclosure Information set forth in the last section of this website.