1) You are only contributing the automatic deferral amount
2) You assume the funds that were great when you picked them are still great
3) You have dipped into your 401k balance
4) You aren’t keeping an eye on your 401k
5) You are obsessing over your 401k
6) You haven’t consider how you will actually spend the money in retirement
This article dives into each question a bit further and explains the potential ramifications.
As payroll specialists, we most frequently hear about number 1 and number 3.
It’s great when companies have an automatic deferral amount for employees. We find this typically increases the participation and the employees are better for it. The problem is, the deferral amount is usually not enough to fund retirement. It’s important for employees to consider their own situation; how much they will need and how much they can afford to contribute; rather than simply go with the automatic deferral amount.
We also, unfortunately, see lots of employees dip into their 401k plans before retirement. This can create extra costs and penalties while also reducing the overall amount contributed. This can dramatically alter the amount contributed and cost the participant greatly. We strongly recommend that you consult with a financial professional before dipping into your 401k. There could be other options and you should have a clear picture of the ramifications before taking action like this.
If you have any questions about your current 401k plan please reach out to us at firstname.lastname@example.org or 978-998-6896