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Retirement saving should begin early with 401(k)
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Related Topics: BALTIMORE
BALTIMORE (Map, News) - Ignorance isn’t bliss — in fact, it can ruin retirement.
Many people either too aggressively or conservatively invest with their 401(k)s, Kirk Kinder, a member of the National Association of Personal Financial Advisors, told The Examiner. A 401(k) is defined as a plan that allows employees to invest pre-tax dollars into stocks, bonds or money markets, and is usually matched by employers. So if Marylanders have dreams of living out their days on a beach with a drink in hand, or traveling cross- country in an R.V., tomorrow starts today for 401(k) investing.
“The main mistakes we see by people who participate in their retirement plan is in the area of asset allocation,” said Josh Itzoe, a principal with Greenspring Wealth Management Inc., in Towson. “When people are overwhelmed they have a tendency to do one of two things: They either invest all their money in the stable value or money market account, or they pick the one or two funds that have had the biggest returns over the past year.”
Kinder, who works for Picket Fence Financial in Bel Air, emphasizes that it is never too early to start saving. An example he used was of an investor who contributed the max allowed to a Roth IRA from age 20 until 29. Assuming the same rate of return, that person would actually have more to retire with than someone who saved from age 29 to 65. Kinder also recommends a strong plan of attack, with an investor saving 10 percent during their 20s. If they haven’t started saving till later, he recommends 15 percent during someone’s 30s or 20 percent during their 40s.
But there are plenty of pitfalls, and 401(k)s require monitoring, sometimes reinvestment altogether.
“When folks leave a company they tend to cash out their 401(k)s,” said Peg Downey, a certified financial planner from Silver Spring. “Not only does that mean that they use their long-term savings for current expenses and severely [danger] their future retirement, but they virtually always ignore the tax ramifications of this move and get themselves into a big problem.”
And reading the fine print can be just as important.
“Another major mistake we see are employers who implement plans that have exorbitant fees and expenses, many of which are often hidden or disclosed,” Itzoe said. “The impact of an additional 1 to 2 percent over time can be the difference between experiencing a comfortable retirement or a terrifying one.”
More Info
For more information on 401(k) investing, you can visit:
www.nasd.com/index.htm
www.401khelpcenter.com
www.investmy401k.com
dcarey@baltimoreexaminer.com
Comments from Examiner Readers
1:59 PM MST on Thu., Jul. 31, 2008 re: "City faces $2.9 billion gap in retiree health benefits"
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8:01 AM MST on Mon., Feb. 25, 2008
re: "Howard considering trust fund for retiree benefits obligation"
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7:11 AM MST on Sat., May. 26, 2007
re: "More than $10M set aside for retiree benefits"
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5:58 AM MST on Fri., Apr. 20, 2007
re: "More than $10M set aside for retiree benefits"
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Examiner Reader said:
Oh sure, raise my taxes. It doesn't matter that I have no retirement plan. That I have worked since I was 16 years old, not including babysitting when I was younger that 16. All the hardworking state employees, I say hard working because I see them napping in yellow trucks, deserve a big fat retirement check. And the city employees, with all the hard work they do by shopping using city credit cards is tiring. They deserve it also! Take my money, what little I have left.
0 agree | 1 disagree
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Not surprised said:
Retirement should be in 401K plans. With the county and the employee contributing. Then there would be no unfunded liability!
32 agree | 23 disagree
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Examiner Reader said:
Baltimore County's website makes no mention of a 5 % penalty , nor does it tell you how they aren't finish yet... if this information is true then employees who have been loyal and hard working are to be pusished for their committment. If the Administration and Council and Govenment on all levels really are so worried about the system , then perhaps they should show how much they care about all of their constituens out here in the communities it by reaching into thier own retirement systems/pockets and pay into the Social Security System. and Retirement system and cut their pays.. Excuse me, but it would seem that we have elected people who have no problem taking pensions from workers who are the backbone of the entire system....yet..pay nothing themselves... I think that perhaps it may be time that government "for the people" replaces "by the people" with "real people."
159 agree | 150 disagree
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Examiner Reader said:
Howard County's approach to funding their retirement liability is not being done by ravaging the current employee's retirement as Baltimore County Executive Jim Smith is trying to do. They also have a Spending Committee evaluating the financial impact. Baltimore County did not have the pension system evaluated prior to proposing the radical changes to the current retirement system.
172 agree | 151 disagree
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