On this episode of "On the Money" Ruedi Wealth financial advisors and Dr. Fred Giertz discuss the features of 401(k) plans and Ruedi Wealth in the media.
Features of 401(k) Plans (19:29)
[Young employees]all seem to know they have a 401(k) plan, but that’s about all they know. They don’t know how much they are contributing, they don’t know how much the employer matches or if they match and they don’t know how the money is being invested. These have a big impact on how and when you retire.- Paul A. Ruedi
Employee Contribution (20:31)
[Your employee contribution] is usually a percentage of your total salary, or salary plus commissions; your total take home pay. It is usually a matter of you selecting how much of your salary you want to contribute from your salary into your 401(k) plan.- Ryan Repko
The maximum contribution is $18,500 per year for your own personal contributions.
- Ryan Repko
Employer contribution and Matching (23:40)
You should at least try to get the match your employer puts in, if they provide that benefit to you.
- Ryan Repko
Some companies will have an automatic contribution into the plan for the benefit of the employee. Another example, which might be a little more common, is for them to match dollar for dollar or a certain percentage of the employee’s contribution.
- Ryan Repko
Vesting (26:00)
Vesting is how long I have to wait as an employee before the money my employer put into my 401(k) is actually mine and I can take it with me.
- Ryan Repko
Investment Options (32:26)
People don’t know the difference between a stock and a bond, let alone what a mutual fund is, the difference between large cap and small cap or growth and value, how much to put in US vs. International, or how to find out what is even in a mutual fund.
- David Ruedi, CFP®, RICP®
I don’t think a target date fund – which automatically shifts the allocation based on your age – is necessarily the optimal approach.
- David Ruedi, CFP®, RICP®
It strikes me, that we have complicated the retirement business, just like health care we put it on the back of employers. So we expect all the employers to be knowledgeable, and what ends up happening most of the time is they have a golfing buddy so they end up with a garbage product.
- Paul A. Ruedi
We talk about the problem of people not putting enough money away, but then when you compound that with poor choices in your 401(k) plan, you may be costing yourself. You don’t know it, but you better love your job, because you may be working into your upper 70’s and you probably won’t retire the way you want. That’s how critical these things are
- Paul A. Ruedi
Roth vs. Traditional (42:22)
Most people don’t know what the difference is. A traditional 401(k) contribution means you are putting money in that hasn’t been taxed yet, so you are putting pre-tax dollars in and when you withdraw the money it will be taxed at that point as ordinary income. A Roth IRA is kind of the opposite – you are putting in after-tax dollars now, and then it grows, and when you withdraw it the money will be tax-free, assuming it is a qualified withdrawal.
- David Ruedi, CFP®, RICP®
Mistakes to Avoid in a Volatile Market (46:08)
It’s so easy now to check your account balance day-to-day. And if we are in a bear market you are going to see your portfolio balance decline day after day and it is going to stress you out and make you more prone to mistakes.
- David Ruedi, CFP®, RICP®
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