It’s a new year, and for many workers, that means it is benefit enrollment season. Even if you don’t need to enroll in new benefits with your employer, it is a great time to review your current benefits and see if any changes are necessary.
Unsure which changes you need to make? Choosing the right employer benefits depends on your unique needs, goals and financial situation. However, if one of your primary goals is to save more money for retirement, then there are a few changes or adjustments you may want to consider.
As you review your benefit options this enrollment season, think about taking the following steps to boost your retirement savings:
1. Maximize your 401(k) contributions.
One of the most effective ways to boost your retirement savings may be as simple as increasing the amount you contribute to your 401(k). Many consider having this contribution taken directly out of their paycheck as the easiest way to maximize their contributions. Consider setting a higher contribution amount or maxing out your contribution to best optimize your 401(k).
For 2017, the maximum contribution amount for a 401(k) is $18,000, with a $6,000 additional catch-up contribution limit for participants over the age of 50—the same as 2016. If your employer offers a match, it will go in to your account on top of your contribution and could help boost your retirement savings very quickly.
2. Fund your HSA.
Does your employer offer a health savings account (HSA)? If so, now may be the time to start contributing to it. An HSA allows you to contribute money on a tax-deductible basis, grow the money tax-deferred and then withdraw it tax-free (as long as it is used for qualified medical expenses).
Here’s how it can become a powerful retirement savings vehicle. You don’t have to use the money in your HSA every year. You can rollover your unused funds, and even take the account with you into retirement. This means you can start saving for medical bills you will likely face as you age. Best of all, you can grow the money over time in a tax-advantaged manner.
3. Reduce your 401(k) fees.
Want to improve your 401(k) return by a percentage point or more? Take a look at the fees you are paying for your 401(k) investments. Many investors don’t know there are fees inside of their 401(k) plans. However, it’s likely your plan has administrative fees and management fees for each of the funds.
Ask your plan administrator for a breakdown of your plan’s fees. If you’re invested in high-cost investment options, consider whether or not you could get the same level of diversification, risk management and performance potential from lower cost funds.
Also, if you still have a 401(k) plan at a former employer, consider rolling it into an individual retirement account (IRA). With an IRA, you may be able to choose your own investment options, so you can focus on keeping investment fees under control.
For more information, discuss your benefit options with Hal Hammond in Sarasota. He can help you develop a financial plan and determine how your current benefit selections fit into that plan.
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