You may now be entering the “open enrollment” period, that time of year when you get to make changes to your employee benefits. Your benefit package can be a big piece of your overall financial picture, so you’ll want to make the right moves, especially in regard to your employer-sponsored retirement plan.
Take a close look at your 401(k), 403(b) or 457(b)plan and keep these possible moves in mind:
• Boost your contributions. If your salary has gone up over the past year, boost your contributions to your employer-sponsored retirement plan. The contribution maximum amounts for 2014 are $17,500, or $23,000 if you’re 50 or older to your 401(k) or similar plan. Remember the key benefits of these plans: Your money can grow tax deferred, and your contributions can lower your annual taxable income.
• Don’t miss the match. Try to take full advantage of your employer’s matching contribution, if one is offered. Your employer may match 50 percent of employee contributions, up to the first 6 percent of your salary. So if you’re only deferring 3 percent of your income, you are missing half the match or leaving money “on the table,” so to speak.
• Rebalance. You may be able to change the investment mix of your retirement plan throughout the year, but you might find that the best time to review your holdings and rebalance your portfolio is during open enrollment. Try to determine if your investment allocation is still appropriate for your needs or if you own some investments that are chronically underperforming, and always keep in mind the need to diversify. As you near retirement, you may need to lower your overall risk level, but even at this stage of your career, you’ll benefit from a diversified portfolio. While diversification can’t guarantee a profit or protect against loss, it can help reduce the impact of volatility on your holdings.
• Review your beneficiary designations. Your retirement plan’s beneficiary designations are important and, in fact, can even supersede the wishes you express in your will. If you experience changes in your life like marriage, remarriage, a birth or an adoption, you’ll need to update the beneficiary designations. It won’t take much time today and it can help prevent a lot of trouble tomorrow.
You work hard for the money that goes into your retirement plan, so make sure your plan is working hard for you.
Information provided by Matt Kneifl, financial advisor, Edward Jones, 1100 73rd, Windsor Heights, 279-2219.