Your Wealth Puzzle » 401k contribution

3 Easy Steps To Successful Financial Planning

yourwealthpuzzle — Thu, 07 Apr 2011 16:59:33 +0000

Financial planning is much more than just saving and investing. It’s more about what you keep than what you make; always remember that.

Financial planning is setting a course, monitoring that course often and following that course until you have reached your destiny.

A successful financial plan is one that will help you to maneuver around whatever detours you face on your journey. You will have set- backs and a strong financial plan helps you overcome those setbacks.

Your financial plan is your road map to get you where you want to be financially speaking. This road map is supposed to get you from one point to the next. You can build a strong financial future if you have a strong road map to get you there.

Your financial plan must take into account your entire financial picture; so be sure to include tax planning and retirement planning. Let’s review the steps you can take to start your financial plan .

Successful Financial Planning:

Action Step #1 – Set Your Course:

Financial Goals:

Start with your financial goals. Do you have any financial goals?
Have you ever asked yourself where you want to be 5 , 10 years, 15 and 20 years from now?
Do you want to be earning the same amount of money?
Do you want to be in the same job?
Do you want to still be working?
What do you want your net worth to be?
When do you plan on retiring?
What do you want to do when you do retire?
What other financial obligations will you have in the future?
Will you have to care for elderly parents?
Will you have children who want to go to college?
If you have children who will go to college in the future, are you saving any money now for them?

Action Step # 2 – Monitor Your Course:

You may sometimes need help monitoring your own course.
Others may see red flags that you don’t.
Work with a financial planner to help you monitor your progress.
A financial planner can see red flags that you may miss.
Planners can also make suggestions to get you back on track.
If your employer provides a 401k adviser as part of your 401k program; work with that advisor.
Work with your accountant to do some tax planning.
Proper tax planning may help you save money today.
Save money by investing in your retirement plans; you lower your taxable income.
Retirement planning experts say that you should start saving for your retirement the day you get your first pay check.
If you develop the habit of investing a portion of every paycheck, starting with your first, retirement planning doesn’t become a chore because it’s a habit.

Action Step # 3 – Follow Your Course:

Through financial setbacks stay true to the financial course you set.
You have a financial plan to set a course to keep you financially strong.
When you started your financial plan, you determined how much money you will need to reach your financial goals.
Stay true to that investment plan you originally established.
If you set out to maximize your 401k contributions to receive your employer’s match, continue to do so.
If you planned to pay for your child’s college education, stay on course.
When you set your financial course, you had strong reasons for doing so; don’t back down.
The financial decisions you make today will significantly impact your financial position tomorrow.

Financial planning, tax planning, retirement planning all require a commitment from you. You know what you want, you now know you need to set a course to get there. Stay true to yourself and your financial goals.

401k Investment Benefits In Tough Times

yourwealthpuzzle — Wed, 10 Feb 2010 19:55:50 +0000

As you look around what do you see? The economy has bottomed out, your 401k account statements are showing negative returns, you can’t seem to get ahead, the cost of everything you buy keeps going up not down. We are in tough times.

So you keep asking yourself why in these turbulent times are you still investing money into your 401k’s? And why do you keep your 401k account open?

There are many good reasons to keep investing into your 401k’s: the tax advantages, the free money, the 401k contribution limits, the tax-free 401k loan capabilities and the tax-free 401k withdrawal options.

Let’s review the 401k investment benefits which do outweigh the negatives, even in tough times.

Taxes:

You can save on taxes.
401k investments can lower your taxable income for the year.
Sometimes you can use the monies in your 401k plan on a tax-free basis.
Check with your accountant and 401k plan administrator.

Free money:

You can get FREE money.
If your employer matches your 401k investments, you are receiving FREE money.

401k Contribution Limits vs IRA contribution limits:

The 401k contribution limit is greater than the IRA contribution limit.
For 2010 the 401k contribution limit is $16,500.
And for 2010, the 401k catch-up contribution limit is $5,000 if you are over the age of 50.
The IRA contribution limit for 2010 is $5,000 with a $1,000 catch-up contribution.

401k Withdrawal Capabilities:

In a financial emergency, you can make a 401k withdraw
There are 4 reasons you can withdraw from your 401k.
To prevent severe financial hardship, to pay medical bills, 1st time home buyer, to pay for higher education
You cannot take a withdrawal from an IRA without taxation and incurring tax penalties.

401k Loan Capabilities:

In a financial crisis, you can also take a 401k loan.
Under the right circumstances, penalty-free.
Not all 401k plans offer the 401k loan option.
You will have to check with your employer on loan capabilities.
401k loan interest rates are generally quite low.
You cannot take a loan against your IRA balance.

Everyone’s financial situation is unique. You need good guidance in tough times. You need the facts so that you can make good financial decisions on what works best for you.

Talk with your 401k plan adviser about your best 401k investment options. And talk with your 401k plan administrator about the 401k contribution limits and 401k loan capabilities of your plan.

401K Maximum Contribution & Ira Contributions

yourwealthpuzzle — Fri, 03 Jul 2009 17:56:15 +0000

Taxes:

Your 401k and traditional ira contributions decrease your taxable income for that tax year, thereby reducing your overall taxes. So why would you not want to contribute as much as possible.

Matching:

Matching is free money. If your employer matches your contributions, by making your 401k maximum contributions you increase the employer match. An increased employer match is an increase in free money to you. So why would you not want additional free money.

Like your 401k contributions, traditional ira contributions also grow tax-deferred. Both contributions can be tax deductible. Your withdrawals from either of those accounts will be taxed. But Roth ira contributions do not grow tax-deferred and they are not tax deductible. Your withdrawals from a Roth ira are not taxed.