IRA & 401(k) Guidance

Contributing to a 401(k) or a similar employer-sponsored qualified plan is a convenient and popular way to save for retirement. As of 2020, 60 million American workers were actively contributing to one of the country’s 600,000 plans. Plans are built to offer a tax-efficient way to accumulate savings for use in retirement income. You can contribute up to $20,500 in 2022 and $27,000 if you’re over the age of 50. If you can’t maximize your contributions, it’s smart to contribute the percentage of your salary that your employer matches. The match is tantamount to free money, and it can grow on a tax-advantaged basis right alongside your own contributions.

Optimal use of your plan requires putting time and effort into managing your account and making smart decisions with respect to your investment mix, how much you contribute, and whether you invest pre-tax or post-tax dollars. Your decisions become increasingly important as your account balance grows and you move closer to retirement.

It’s important to rebalance your account periodically to maintain your chosen asset allocation. If your plan offers automatic rebalancing, you can take advantage of the service. With a do-it-yourself approach, you run the risk of forgetting or making errors.

Most investment portfolios require modification from time to time. As retirement approaches, people commonly reduce their portfolio’s allocation in equities and increase the percentage in fixed income and guaranteed return products. This reflects changes in their primary financial objective, which transitions from growth to asset preservation and income generation. 

Most 401(k) participants always want to know where they stand in relationship to their retirement savings goals. Realizing that you’re on target brings peace of mind. Seeing that you’re behind can lead to action, such as making catch-up contributions starting at 50.

Account management gets more complicated if and when your 401(k) nest egg needs to generate retirement income. Options exist within the plan and outside it, and each one has its own advantages and disadvantages. Many participants choose an IRA rollover because they feel it offers greater investment flexibility and more control. Participants are also increasingly turning to annuities either inside or outside the plan to get lifetime income guarantees. 

Generally speaking, borrowing money from a 401(K) isn’t advisable because it’s a long-term investment that’s earmarked for retirement. Be careful to avoid the temptation to cash out of the plan and spend the money. Chances are you’ll not only face a big tax income bill and pay a big penalty tax, but you’ll also wish you still had the money when you’re looking for retirement income. 

How We Can Help You Optimize Your 401(k):

Let Johnson Brunetti guide you in optimizing your 401(k). Our holistic approach to planning allows us to see the plan within the context of your total financial picture and top financial goals. We can offer recommendations based on our knowledge of your needs as well as our experience in helping thousands of clients who rely on their plan for accumulating savings and generating retirement income.

We’re here to help you make well-informed decisions throughout the life of your plan. You can count on our professional guidance in monitoring performance, making investment choices, balancing your allocations, and generating tax-efficient retirement income. We’ll teach you to focus and streamline your account management efforts so you can save time and improve performance. As you approach retirement, we’ll guide you in reviewing all the options you have for using your 401(k) nest egg to generate tax-efficient income. 

Together, we’ll look at the pros and cons of Roth IRA conversions, IRA roll-overs, and annuities for preserving and creating more retirement wealth. We can help make these and other transactions easier using our expertise.

We’re happy to provide answers to questions, such as:

  • How much should I save in my 401(k)?

  • What type of investment performance should I expect?

  • If I’m behind in my savings, how can I gain ground?

  • Is my exposure to investment risk appropriate for my risk personality and age?

  • Are my investment choices the correct ones?

  • How can I go about generating retirement income from my 401(k)?

  • When I retire, should I leave my money in the plan or roll it over into an IRA?

  • If I have multiple 401(k) accounts, should I consolidate them?

  • How often should I check my account balance and review my investment performance?

  • When and why should I change my investment options?

  • If I have an emergency expense, can I borrow my 401(k) money?

  • Will I be penalized for withdrawing money if I retire early?

Our Philosophy & Approach to 401(k) Management:

1. We see your 401(k) in the context of your entire financial picture

You’ll be confident that your 401(k) is working in synergy with your other retirement savings and sources of retirement income.

2. We use our experience to optimize yours

We share our knowledge of retirement planning, in general, and employer-sponsored plans, in particular, so you can make well-informed decisions based on a thorough understanding of your options.

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  • Sandy and Thomas C.
    Sandy & Thomas C. are clients of Johnson Brunetti and received no compensation for their statement.

    “We always felt our financial needs were in very capable hands. Alex Angst is great to work with. Our advisor always made us feel he had our best interests at heart and explained things so we could understand them.”

  • Robert G.
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    “We’ve been clients of Johnson-Brunetti for > 10 years. We’re enjoying a comfortable retirement as a result. Many thanks to Joel and our CFP, Eric Hogarth. I wish we had plugged into this decade approach back when we were in our 30s.”

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    “Working with Johnson Brunetti has had a positive impact on my life by providing me with the knowledge, confidence, and peace of mind to move forward with my retirement plans. The process of getting to this point, through their guidance, has been informative and pleasurable.”

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    “I view your company as one that puts my interests first. I think that is very uncommon and very refreshing. “

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    “Matt does an awesome job! So easy to understand and he listens to our concerns and addresses them! happy I chose your firm!”

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    “I have been pleased with the help and service I have received from the company. I have met several team members on Eric’s team and have found all of them very well prepared to meet with me when reviewing my portfolio. I always feel that I am an important customer and appreciate that very much. I hope the firm continues to focus on the customer and maintains its great service. I think you do a great job for someone like me!!!! I’m happy I chose your firm!”

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