The beauty of a 401(k) is that you don’t really need to think about it once it’s set up. Regardless of stocks, you’re investing automatically into this retirement account and building for the future. In fact, it’s easy to forget you’re investing when it’s taken from your payroll automatically. However, it’s not wise to completely ignore your 401(k). Considering the account is important for retirement, you should check that it’s actually working for you at all times.
Here are five things you should check each year!
1. Your Retirement Goals
The younger you are, the more difficult it is to consider retirement. When in your 20s, it’s depressing to think about being old and gray. It doesn’t matter how far away you are; there’s nothing wrong with planning in advance. Many experts recommend planning to replace 80% of income before retirement.
These days, there are lots of high-quality retirement calculators online that should help with your retirement goals. As you near retirement, estimations get more accurate, and you’ll get a clearer picture of how much you’ll need, when to claim Social Security, etc.
2. Beneficiary
You might have a will, but this doesn’t mean you should ignore the beneficiary on all retirement accounts. In most cases, the beneficiary listed on retirement accounts is prioritized over anything in a will. If you want the right people to receive your 401(k) money, make sure the beneficiary is correct with your account. Even if you divorced the beneficiary many years ago, your ex-spouse could still receive everything because of this rule even if the will is up to date.
As well as checking this information every year, we also recommend getting into the habit of checking the beneficiary after big life events; this includes marriage, new children, divorce, and others.
3. Asset Allocation and Risk Tolerance
As any financial expert will tell you, looking at short-term market changes when deciding risk tolerance is never a good idea. This being said, you should consider your risk every year. Sometimes, it’s worth sacrificing returns by choosing bonds over stocks when retirement is close or a crash is expected in the market.
In terms of allocation, we recommend starting with the ‘110 rule’. Essentially, you start with 110 and then subtract your age to decide what percentage should be in stocks. For a 50-year-old, they should have 60% stocks and 40% bonds. Meanwhile, a 25-year-old should have 85% stocks and 15% bonds.
4. Actual vs. Expected Contributions
It’s normal to sometimes fall behind our goals, and the important thing is that we make a plan to recover as soon as possible. Of course, this starts with getting the full match from your employer. If you’re already getting this, review your finances and see if there’s room for maneuver. Can you start saving an extra 1%? This might seem small, but it’s better than nothing and makes a difference over a long period.
Some people invest the minimum for full employer contributions and then invest the excess into an IRA. Here are the contribution limits for 2021:
- 401(k) – $19,500 (over 50s – $26,000)
- IRA – $6,000 (over 50s – $7,000)
5. Fees
As the final step for checking your 401(k) this year, it’s always wise to assess the fees you’re paying. The more you pay in fees, the more it reduces your retirement portfolio. You might have heard about all the advantages of target-date funds, but did you know it has a 0.51% expense ratio? This means $5.10 for every $1,000 investment.
The expense ratio is often FIVE TIMES smaller with a passively managed index fund. With a reduction in fees, you could actually save yourself tens of thousands by the time retirement comes.
After following these five steps, you can breathe a sigh of relief that your 401(k) is working for you throughout 2021!
Contact Information:
Email: [email protected]
Phone: 3604642979
Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.
Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.
Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.
Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.
Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.
With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.
Aaron can help you and your family to create, preserve and protect your legacy.
That’s making a difference.
Disclosure:
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision.
Confidential Notice and Disclosure: Electronic mail sent over the internet is not secure and could be intercepted by a third party. For your protection, avoid sending confidential identifying information, such as account and social security numbers. Further, do not send time-sensitive, action-oriented messages, such as transaction orders, fund transfer instructions, or check stop payments, as it is our policy not to accept such items electronically. All e-mail sent to or from this address will be received or otherwise recorded by the sender’s corporate e-mail system and is subject to archival, monitoring or review by, and/or disclosure to, someone other than the recipient as permitted and required by the Securities and Exchange Commission. Please contact your advisor if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Additionally, if you change your address or fail to receive account statements from your account custodian, please contact our office at [email protected] or 800-779-4183.
