How Does Your 401(k) Stack Up and other bits…

Source: Kat R via Flickr

Source: Kat R via Flickr

How Does Your 401(k) Stack Up (US News): According to Vanguard, one of the largest 401(k) plan administrators, of all of the 401(k) plans that they administer, 94% of them offer a corporate match. The vast majority of those matches are at least 4%, with 6% being the most common. Even if your employer doesn’t provide a match, you should still contribute to your 401(k) plan.

If your employer does offer a match, it’s free money; no one should pass up free money. Regardless as to whether your employer matches your contributions or not, your contributions will lower your tax basis now and the gains on your investments will either be tax deferred, or if your employer offers a Roth 401(k) and you elect to go with that option, your contributions won’t help your tax basis now as that money is invested with after-tax dollars, but it sure will help you when it comes time to redeem those investments as withdrawals from a Roth are tax free. Imagine investing your money for decades, having it grow (hopefully) to seven figures and then you living off of those gains without having to pay the government a dime!

Again, if your employer matches your investments, regardless of the percent match, be sure to take full advantage of that. Regardless, contribute to your 401(k) plan, and if your employer offers a Roth 401(k), be sure to take full advantage of that too.


The one thing stopping you from early retirement (USA Today): Few people want to talk about their financial situation. Even fewer are willing to budget and plan their future. Early retirees not only take the time to plan their financial futures, they stay on track by consistently spending less than they earn and investing the difference. They automate their savings, look for opportunities to increase income, focus spending on things that truly matter, and remember that keeping up with the Joneses is a losing battle. They also recognize that money equals freedom while debt comes with shackles. When early retirees or those striving to retire early hear about the average new vehicle loan hitting a record $28,711 with an average duration of a record 67 months, they simply shake their heads. They give the same response when learning the average household credit card balance is $7,177.


Companies, Business Groups Blast Overtime Proposal (Wall St Journal): Good news, bad news. There is legislation in place, but not yet implemented affecting overtime pay. Good news for employees; more of them will now be eligible for overtime pay.

The proposed rule, unveiled Tuesday, would raise the salary threshold that generally determines who is eligible for overtime pay to $970 a week, or about $50,400 a year. That would be more than double the current threshold of $455 a week, set in 2004.

The bad news is that many employers are already indicating that they will not pay the overtime. Their workaround will be to decrease the number of hours that their employees will work to keep them below the “overtime eligible” threshold.

“The [new] rules are going to force more people into part-time work, and we’re already seeing that with Obamacare,” said Scott Gittrich, the founder and president of Toppers Pizza Inc. in Whitewater, Wis.

Again, this legislation is not in place yet. It will take the Labor Department many months to finalize the new rule, after a 60-day comment period. But Labor Secretary Thomas Perez said that he expects companies to end up paying U.S. workers up to $1.3 billion more a year in overtime wages.


How To Plan For An Unexpected Early Retirement (Forbes): Sounds a bit like an oxymoron unexpected early retirement. the reality is, many people find themselves unemployed in their 50’s and 60’s. With the savings rate as low as it is in the U.S. today, it is incredibly difficult for those people who unexpectedly lose their jobs later in life to make ends meet. You need to plan for this potential. Social Security benefits are not going to get you where you want to be financially. Besides, full benefits aren’t available until you reach your 66th or 67th birthday. Unfortunately, many people draw upon their Social Security benefits at 62 when they come available to you. But taking them early results in a huge reduction in benefits. Save and plan for your future. This article provides several logical suggestions:

If an Involuntary Retirement Comes

If retirement does catch you by surprise, take a deep breath and assess your options. A few suggestions:

  • Evaluate which expenses are absolutely necessary and which are not as critical, then adjust from there.
  • Try not to raid your retirement savings. Consider whether you can cover your essential costs by reallocating your emergency funds before cashing out any pensions or other retirement plans.
  • Look into whether you could do part-time work to generate income.

 

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