Four Things Every Retirement Investor Should Know replacing How a 401k plan works

Charles Schwab & Company recently suggested the following four things every retirement investor should know.

1. Contribute the maximum you can

Make the most of a company retirement plan: Investing in a company 401(k) or other retirement program is a powerful savings tools. 401(k) deductions are pre-tax and, money can grow tax-deferred. Investors should contribute the maximum amount for the greatest benefit, or at the very least, set aside the percentage the employer matches. Matching dollars are also pre-tax, which can greatly increase growth potential over time.

Maximize opportunities with previous employers' plans: If a 401(k) is still with a former employer, investors may want to consider rolling over a 401(k) into an IRA for greater investment choice and control, and to help protect the retirement assets that have accumulated.

2. Be aware of risk

All investments contain some degree of risk, but there are ways to minimize it. The main types of risk that can affect a portfolio are:

When choosing investments, investors should structure portfolios to minimize risk. The following may lead to increased portfolio risk:

Two investment strategies that may help minimize your risk are diversification and dollar cost averaging.

3. Save beyond company retirement plans

Generally, most Americans will need 70 to 80 percent of their current income in order to sustain a comfortable lifestyle during their retirement years. Unfortunately, Social Security will not be enough for most. In addition to company retirement plans, the following retirement savings vehicles may help investors achieve financial independence in retirement:

4. Plan and re-evaluate a retirement investment strategy

Whether retirement is in five years or 20 years, investors should periodically re-evaluate retirement portfolio and assess progress toward retirement goals.

(1) Consult your tax advisor to determine if your situation allows higher contributions.
(2) Distributions made before age 59 1/2 may be subject to early withdrawal penalties.
(3) Withdrawals of earnings are subject to ordinary income tax.


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