5 Questions To Ask Before Contributing To A 401(k)

American Investment Planners LLC

500 North Broadway, Suite 260, Jericho, NY 11753

(516) 932-5130 / (866) 932-5130

Starting a new job is always exciting - it's a chance to meet new people, learn a new skill, and ultimately it's a stepping stone in your journey towards achieving your career goals. What makes it even more exciting, though, is when you find out that your new employer offers a 401(k) plan.

Before you do anything, however, it's important to sit down with both your employer and your financial planner so that you can address any questions and get all of the information you need to ensure that you approach saving for retirement correctly. Below, we've listed out five of the most important questions we think you should ask.

1. When am I able to start contributing?
Depending on the job, you may automatically have been enrolled in a 401(k) plan or you may have to enroll yourself after a certain amount of time has passed. Since you don't want to miss out on valuable savings opportunities, you'll need to know exactly when your contributions will start kicking in. If you are required to wait until you've been employed for a few months or maybe even a year, consider other retirement plans such as IRAs and Roth IRAs in the meantime.

2. How much am I able to contribute each year?
This one is extremely important, as all too often people don't save enough simply because they didn't know how much they were allowed to contribute. In 2016, the maximum contribution limits for employees under 50 years of age is $18,000. For employees that are 50 or older, the contribution limit is $24,000, which includes a $6,000 catch-up contribution that is permitted.

3. Does the company offer a 401(k) match?
A lot of times, companies will offer a 401(k) match and contribute what some like to say is "free money" to your plan in addition to what you're already contributing. However, for some plans, you will be required to contribute a certain amount before you become eligible to receive a supplemental contribution from your employer. To ensure that you aren't missing out on any of this "free money," ask your employer how much you are required to save in order for them to do the same on your behalf.

4. When do I become 100% vested?
While the money that you contribute to your 401(k) plan is always yours and available for you to take if you should leave your job, sometimes the money that your employer contributes does not become fully yours until you've been employed for a certain amount of time. That said, if you don't think that the job you're at is going to be your forever job, it's worth it to try and stick it out until you are fully vested so that you will receive, in full, what your account balance reflects.

5. Are there account management fees?
Last but not least, you should always be familiar with any fees that are applied to your investments and/or for the management of your account. This is normal, but if your account fees are high and you're unaware, it can be pretty disheartening when you check in on your account balance for the first time and see a ton of money taken out. At the very least, you'll at least want to be prepared!

As a team of financial planners that has worked with many clients on their retirement plans, we know exactly what questions you should be asking and what you should be doing as far as investments to ensure that you set yourself up for a successful financial future. 

To sit down with one of our financial advisors and talk about your 401(k) plan, please give us a call at (516) 932-5130 or email info@americaninvestmentplanners.com today.