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Tom Meaglia, ChFC®, AEP®,

CLU®, CRPC®, MSFS

Chartered Financial Consultant

Investment Advisor Representative

Chartered Retirement Planning Counselor

CA Insurance Lic. #0567507

 

Meaglia Financial Consulting

2105 Foothill Blvd., #B140, La Verne, CA 91750

 

Toll Free: 800-386-3700

Bus:         909-593-6105

Cell:         818-681-8600

Fax:         909-593-6120

 

Email: tom@meagliafinancialconsulting.com

Website: www.meagliafinancialconsulting.com

July/August 2018

Beyond Plan Defaults

Beyond Plan Defaults

If you have a 401(k) plan at work, you have a powerful vehicle through which you can save for retirement. Today, more employers are offering automatic tools to help participants put money away into their 401(k)s. While these work for many employees, they may not be right for you. Here’s a look at some of these auto tools and ways you might improve on them.


Auto Enrollment
The idea behind this innovation is that employees fail to contribute to a retirement plan because of inertia, so they are automatically enrolled in the plan when joining the company (with the choice to opt out). Contributing toward your retirement is good, so there’s little to improve on here. You might, however, compare it to a Roth 401(k) plan if you have that option.


Auto Contributions
With this option, employers choose the percentage of employees’ salary to initially contribute to a plan. This is often a low number: With many plans, 3% is the default rate. Anything, of course, is better than nothing. But you will typically have the option to raise or lower your contribution on your own. Consider raising it, especially if you’re not putting away enough to match a potential employer contribution match.


Auto Escalators
Automatic contribution escalators raise the percentage of salary contributed to a 401(k) plan over
time. This is an attractive way to bump up your retirement savings efforts as you receive promotions and pay increases. You might even decide to raise it more on your own, perhaps up to the maximum allowed by the plan.


Auto Accounts
The default account of the majority of plan sponsors is a target date fund — a diversified fund that includes stocks, bonds and cash. Typically, this is a somewhat conservative way to invest according to your retirement timeframe. However, you may want to choose your own investments if you have a more conservative or aggressive approach to investing.


Talk to your financial professional to learn how investing in a 401(k) plan or IRA can help you prepare financially for retirement.


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