Many people question whether or not they should max out their 401k. They think the best action is to save everything they have for the future. But in reality, it all depends on your financial situation.
$18,000 is the maximum amount you can put into your 401k, your employer-sponsored account, if you are younger than 50. But is this really the right decision?
Before you put all of your eggs in a basket think of these other options first.
1. Nonretirement Goals
You need to stop and think for a moment if you have fulfilled your other goals besides retirement funding. Do you have life insurance set up? Have you set up a will?
Do you have disability insurance set up incase you are unable to work for 6 months or longer? Do you need long term care insurance?
If you want a good financial foundation, you should have these goals fulfilled before maxing out your 401k.
2. Today Vs. Tomorrow
Before putting $18,000 away to save for retirement, you need to make sure you have enough for your daily living expenses. It may not be a realistic option to put so much into your savings.
Especially if you have worries such as having enough to pay for rent, gas, and etc.
3.Other Investment Options
A 401K isn't your only option. There are other investment options that you can put your saving into to increase your money flow.
If the fees in your 401k are high, direct additional money to a traditional or Roth IRA. The contribution limit is much lower (5,500 a year)
and if you have over that you may put it into a 401k. The difference between the two is that tradition IRA are pre-taxed at contribution and then taxed at distribution, while Roth IRAs
are made with after-tax contributions, but tax-free at distribution
Whatever option you decide on, Cosmo Insurance Agency will be there to support you with your finances. Our knowledgeable and experienced team will help you ensure that you are covered and have a secure financial future.
Call us from Monday-Friday 9:00 AM to 5:00 PM and one of our trustworthy employees will answer any question you have.