Whether you can retire on your company’s 401(k) is dependent on a lot of ifs.
- If the company doesn’t close its doors.
- If the company doesn’t downsize.
- If you’re still working for the same company when you retire.
- If the company isn’t the sole provider of your retirement.
Even in the modern age with Gen-Xers and Millennials making up a big portion of the workforce, it’s still a given that employers, second only to the government, will continue to be the chief providers of retirement accruals to workers.
But is this a realistic expectation from employees who work in an unstable job market where the average tenure at any company is just under five years? Let’s take a closer look.
Your 401(k) Won’t Cut It
There’s no question that a 401(k) is the foundation of a solid retirement plan. In fact, you get tax breaks while you are investing in your retirement. However, the moment you retire and draw funds from the account, you’ll have to pay taxes on the income. Those taxes can eat into your check each month, leaving you with far less than you intended.
...And Social Security?
The Social Security Administration has officially announced that there is enough social security to pay out until 2035. Social security contributions have declined considerably since 2010. As it stands, the government is paying out more than it is taking in.
Taking both of these factors into consideration, you may want to seek an additional sustainable retirement plan that you can count on when you can no longer work.
What are some of your best options?
Roth IRA (or Roth 401k)
A Roth IRA allows you to pay taxes on your contributions on the front end, so you don’t owe taxes during retirement. All withdrawals are tax-free regardless of how much retirement you have accumulated. There are other benefits to Roth IRAs as well:
- You are not required to take distributions at a certain age.
- You can keep contributing to your account after retirement age.
- Plus, you can choose beneficiaries to inherit your account and withdraw tax-free.
HSA (Health Savings Account)
A health savings account allows you to save for medical expenses and reduce your taxable income. You decide how much to contribute to your account up to government-mandated maximums. The HSA gives you an alternative if you have high-deductible insurance. There are also tax benefits of HSAs. Contributions are pre-tax tax deductible, and you’ll also be taxed as though you make less money because income is taxed after you make your HSA contributions. If you choose, you can invest your HSA in mutual funds, stocks, or other investment tools.
Life insurance is security for the future. No, it’s not a financial investment. Rather, it’s risk management. Life insurance is for those you leave behind—specifically, your spouse. A life insurance policy may not provide long-term financial security (depending on the amount of your policy). However, it does take care of short-term expenses and immediate emergency funding if your spouse’s income drastically reduces after you pass on.
A brokerage account is an account that an investor maintains with a licensed brokerage firm. It’s a specialized account that allows you to buy and sell assets such as stocks, bonds, mutual funds, currencies, or options. An investor deposits funds with a firm to maintain a cash or margin account.
A financial advisor can offer a wide range of services such as financial planning, investing, retirement planning, tax advice, or portfolio updates.
Financial Services in Eden Prairie, Minnesota
Boulay works with individuals, businesses, and public entities to help ensure their financial success and stability. We are committed to helping you make the best decisions that secure your financial future.
To find out more about our financial services in Eden Prairie, Minnesota, contact us at 952.893.9320 or email@example.com.
Investment Advisory Services offered through Boulay Financial Advisors, LLC a SEC Registered Investment Advisor. Certain Third Party Money Management offered through Valmark Advisers, Inc. a SEC Registered Investment Advisor. Securities offered through Valmark Securities, Inc. Member FINRA, SIPC 130 Springside Drive, Suite 300 Akron Ohio 44333-2431* 1-800-765-5201
Boulay PLLP and Boulay Financial Advisors, LLC are separate entities from Valmark Securities, Inc. and Valmark Advisers, Inc. Prime Global is not affiliated with Valmark Securities, Inc. and Valmark Advisers, Inc.
File Download: Are Your Employee Benefits Going to Last Through Retirement?