Saw this article trending on LinkedIn today: CBS article: 401(k) savings advice for Gen-Xers
While I do agree with much of what was written, I feel that it necessary to shed some light on what the author claims is the only retirement savings option. First off, I agree that any employee should absolutely max out their option of employer matching into their retirement account. That’s a no brainer simply because it is free money. On the other hand, over funding above and beyond what is matched, in my opinion is something that should be seriously considered. Why would someone want to contribute over their employer matching percentage into something that is frankly a big question mark as far as income it can provide in the future?
Did you know that the average American approaching retirement age has in their 401(k) plan? It is pretty devastating figure of $30K. Click here for more info on what happened.
It would make sense if 401(k) were the only option. However, there are vehicles out there that are superior to a 401(k) for purposes of providing retirement income. Vehicles that offer not only deferred taxes during the growth phase, but also provide preferred taxes during distribution. This is a vehicle that is similar to a Roth IRA without the penalties and restrictions associated with a Roth. The other advantage of this particular vehicle is that it is guaranteed contractually to never loose principal or earned income. At the same time, it is market driven, so you take advantage of growth following a stock index such as the S&P 500 up to a cap.
If you would like to know more about this, contact me and I can fill you in on the specifics. Don’t forget to share