US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The second retirement resolution was to max out your contributions to your 401(k).
“I try to fund all the retirement accounts I can to the max,” says Ed Slott, the author of Your Complete Retirement Planning Road Map. “The way to really do well is to keep putting more money in to keep funding as much as you can.” Be sure to contribute enough to get your employer’s full match. You should also account for all the 401(k) plans you’ve had at previous employers and consolidate them in your current employer’s plan or transfer them into a rollover IRA, says Dallas Salisbury, president of the EBRI. Rolling a 401(k) over into an IRA allows you to avoid most fees and penalties.
Hmmmm, this one is a little harder to justify because to max out your 401(k), you will need to contribute $15,500 each year – something that doesn’t even sound easy. While contributing what you can to a 401(k), at least the company match, is something positive, I don’t believe maxing out that contribution makes sense for everyone. The 401(k) is powerful in that your contributions are tax deferred, you pay out the tax when you take disbursements, and it’s helpful in reducing your modified adjusted gross income but there are other retirement options worth considering.
Source: US News and World Report