401k & Retirement: How to use it.
A 401K is one of the best financial tools available to save for retirement, as it has tangible benefits both now and later. Often, it is setup through an employer, with money deducted from your paycheck before you ever see it and going into a retirement account which will grow for the rest of your working career. This is a great way to be investing in your retirement for many reasons.
The first and most obvious reason is, participating in a 401K makes saving money automatic and consistent. Once you sign up for the program, the money is put into savings before you even see it, so you don’t have to think about the saving. This means there is no temptation to spend the money on something else, because while the money is yours, it never goes to your bank account. This is very powerful.
Another positive is that typically 401K contributions are taken as a percentage of your income rather than a set dollar amount. How does this benefit you? If you get a raise or bonus, the amount of money you are saving each month increases without you even having to think about it. This is a great way to avoid some of the lifestyle inflation that can happen so easily when making more money.
Once you are near retirement, there are still ways that a retirement planning company in Dallas such as Smart Money CLA can help you use that 401K to make money for retirement. One way is through an annuity such as an indexed annuity. You can roll funds from your 401K straight to an annuity without paying any type of tax or fee, making sure your money is spent on what you want it to be spent on.
An indexed annuity is an investment vehicle that can help increase your monthly income in retirement without the associated market risk that often comes from investing. One of the most important financial factors when in retirement is to decrease your market risk, because too much exposure could take a big chunk of your savings at the worst time. Indexed annuities protect against that downside risk through contract guarantees, giving you the ability to increase your monthly income more safely.
A more traditional annuity might have meant receiving the same amount of money for the rest of your life, decreasing the market risk at the expense of having any growth potential. An index annuity allows for your portfolio to grow while still offering the guaranteed income stream for life, which means it makes sense for retirement.
Smart Money CLA is a 401K investment company in Texas that wants to help you use your 401K to make money for retirement. Download our free guide today to learn more about how we can help, or schedule a meeting with one of our advisors to go over your financial goals and strategies. Don’t scrape by in retirement, but live the life you want!