The Frugal Fiduciary Small Business 401(k) Blog
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The most expensive thing you’ll probably buy during your lifetime is retirement. Perhaps you’ve never thought of “buying” retirement, but that’s exactly what you do when you participate in a 401(k) plan – you’re saving now to buy retirement income later. When you consider that income may need to last 10, 20, even 30 years, it’s easy to understand why retirement is not cheap. However, by following a simple 3-step plan during your working years - save early and often, invest appropriately, minimize account fees - you can reduce the out-of-pocket cost of your retirement by a lot.
Happy Holidays from the Frugal Fiduciary! As 2017 comes to a close, we looked back through this year’s blogs to find the most read.
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In a 2019 401k plan design study of 3,975 small businesses, we found about 71% permit participants to make after-tax Roth contributions to their personal account. I think it’s safe to assume the high adoption rate of this 401k plan feature is due to participant demand.
Ever hear of voluntary 401k contributions? If you are like most people, probably not. They are after-tax employee contributions like Roth deferrals, but subject to different ERISA rules. Voluntary contributions have been around decades longer than Roth deferrals, but are less popular – mostly because their earnings can’t be withdrawn tax-free at retirement like Roth deferrals.
The Roth 401k concept is outstanding – it provides an excellent way to build long-term wealth and may provide outstanding tax benefits for those positioned to make the most of its advantages. The problem is that very few plan participants use it, let alone understand it.