Investing might seem intimidating, but it has become easier than ever.
Many companies offer predetermined investment options for 401(k) accounts, including Target Date funds or Asset Allocation funds. These can be “set it and forget it” funds. These diversified investment options allow you to set things up once and not get bogged down by the ups and downs of the stock market — freeing you up to focus on long-term gains.
And what about pre‑tax vs. Roth 401(k) — what’s the difference? If you contribute to your 401(k) pre-tax, your contributions will be taken out before taxes each pay period. However, you’ll have to pay taxes on the funds when you withdraw them during retirement. If you choose a Roth 401(k), contributions will be deducted from your paycheck after taxes — so you won’t pay taxes when you withdraw during retirement. Once you retire, you might be in a higher tax bracket, so contributing after taxes now could save you money in the long run. Check with your employer to see what is offered.
When you retire, you’ll need at least 70% of your pre-retirement earnings to maintain your standard of living. Social Security retirement benefits typically replace only about 40%, so start building that nest egg now.
Content by Lockton Dunning Benefits