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Make The Most Out of a 401(k)

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In this video, we're talking about the 401(k) retirement plan and how you can make the most out of it. Did you know that the average 401(k) balance is only $103,900, while most Americans believe they need $1.25 million to retire comfortably? With over 100 million Americans having access to a defined contribution retirement plan like a 401(k) or 403(b), it's important to know how to make the most out of your retirement plan.

In this video, our Founder and CEO Johnathan Rankin will cover five important ways to maximize your 401(k). We discuss the impact of taking a loan from your 401(k) to investing tips to maximize your long-term success.

Read The Transcript

You Work hard. You want to make sure you're planning for your long-term financial future. So you put money into this account and you think you're doing the right thing by saving, which you are, but then you get this menu of funds and you're expected to choose the best ones for your financial future. That could be 2030 or maybe even 40 years later, can be extremely overwhelming.

According to Fidelity, the average 401K balance was 103,900. Which is a little concerning considering that a recent study shows that adults in America believe they're going to need 1.25 million to retire comfortably. So with over a hundred million Americans having access to defined contribution plans like 401ks or 4 0 3 , in this video we're gonna cover five important ways, how you can make the most out of your retirement plan for those who are new, the channel.

I'm Jonathan Rankin, the founder and CEO of The Wealth Management, where our goal is to help you maximize your. So how can you make the most outta your 401k? Well, the first way to make the most outta your retirement plan is to not just do the default. Nowadays, most employers automatically enroll you in their plan with usually a small percentage of your salary.

So it might be 1%, might be 3%, but doing the bare minimum of anything in life rarely gets you the results that you want. And the same is going to be true for. , you wanna make sure you're at least saving up to the match if it's offered. And then as you can increase that over time, especially if you get raises, as you get raises throughout your career, it's usually a good idea to increase your contribution along with that raise, so that way you're continuing to keep pace with your long-term retirement goals.

You also want to consider the Roth option if it's offered. A lot of 401ks nowadays have a Roth 401k. And depending on your tax rate today and your tax rate and your retirement, it might make sense to divert some of your money into that Roth option. The second way to make the most outta your 401k is to not take a loan.

This should really be looked at as a loan of last resorts. People often believe that you're paying yourself back the interest, but you're also missing out on any sort of growth. You're taking the money outta investments that have long-term growth potential and into something that's got a static rate of return using your own money.

Also, the need for money often comes when the economy slows and stocks are down. So for example, right now, if you took a loan after the recent pullback that we've seen in stocks over the past year and a half, well, the reality is you're locking in that money at a fixed rate of return using your own money, when at some point in the future we're going to see the market return.

Don't know how long that's going to be, but at some point we're gonna see growth in the market again. And now you've locked your money into something that's not gonna be able to recover to those highs because it's sitting on the sidelines. And a loan fund. You also have to consider that if you leave your employer, you've gotta pay back that entire.

Or you have to pay taxes and possible penalties depending on your age. So it really should be that loan of last resorts. The third way to make the most outta your 401k is to not cash it out. Now, that might seem obvious while you're still working, but it's very important if you change jobs. Data shows that people average over 12 jobs over the course of their lifetime.

So if you have an old job and you, maybe you left your 401K there, even if it's 10,000 or 20,000, or in your mind a number, that just doesn't seem as significant in the grand scheme. Remember that amount doesn't just represent dollars and cents on a piece of paper. It also represents the years that it took for you to accumulate that amount.

So if he took you two, three, or four years to accumulate 10 or $20,000 and you want to cash that out at one time, that's four years that you lost in the overall planning of your long-term retirement. This could also result in a higher tax bill and possible penalties, depending on your age and the. One thing that most people don't talk about is how cashing out your 401k early on will ultimately lead you to feel less confident in your long-term retirement later on.

I've seen this happen hundreds of times in my career where. Talking to someone within five to 10 years of retirement, and they can think back to a time where they changed jobs after a few years. Instead of rolling that money into an IRA or a 401k, they decide to cash that fund out and they ultimately always felt like they were playing catch up with their retirement plan as opposed to being ahead of where they should be Now, the fourth way that you can make the most outta your 401k is to not trade it.

Trying to be an active trader in a 401K is like trying to practice your public speaking skills in a library. It's just the wrong. The execution is often at the end of the day or average throughout the day, and your investment strategy should really be an asset allocation that you can stick with, not something that you're trying to jump in and out of.

According to Vanguard, over 91% of your investment performance will be determined by your as allocation as opposed to your security selection and market timing. So create an asked allocation that aligns with your risk tolerance and rebalance that over. Rebalancing means that you're resetting your ass allocation back to its benchmark on a routine basis.

So if you determine the best portfolio for you is a 60% stock, 40% bond mix, well over time, that ass allocation's going to drift away from that benchmark, and it's going to get to a point where you might end up taking more risk than you initially intended. As you can see in this chart, if you started with a 60% allocation of stocks in 2003 and never re.

You would reach over an 80% stock exposure at certain points, which is well above your intended risk tolerance. By the way, if you're watching and you haven't done so yet, make sure you subscribe to the channel so you can get more updates on videos just like this one. Now, the fifth and final way to get the most outta your 401k is to get professional help.

If you feel uncomfortable about doing it on your own, then it's a good idea to ask for help as early as you can, because now you're setting yourself up for long term success. I look at this like trying to get. I mean, most people know that if you want to get in shape, you've gotta work out and eat healthier.

But the problem is it's hard and it's sometimes really overwhelming when you're stepping into the gym for the first time and you don't know exactly which movements to do. And then you go to the grocery store attempting to eat healthy, and you're trying to figure out what you should buy and what meals you should make so you can reach your long-term fitness goals.

It's a lot easier when you work with a trainer, someone there to help you design the workout plan and help you design and build the meal plan so that all you have to focus. Is the hard work it takes to stay consistent. It's the same thing with 401K investing. I mean, you work hard, you wanna make sure you're planning for your long-term financial future.

So you put money into this account and you think you're doing the right thing by saving, which you are. But then you get this menu of funds and you're expected to choose the best ones for your financial future. That could be 2030 or maybe even 40 years later, can be extremely overwhelming. And then you realize that the plan administrator or the plan provider is there just to administer the.

They aren't there to help you choose investments or determine how much money you should save or whether or not you should invest in the Roth or the traditional account. Getting help is okay, and you should do it as early as possible. Research has actually shown that participants that received expert guidance had as much as 40% more income during retirement versus those who received no help at all.

So if you have questions about your retirement plan and whether or not you are doing everything you should to make the most out of it, use the link in the description below to learn more about how we can help you maximize your retirement. If retirement is on your mind, make sure you check out this video where we cover retirement advice that you should actually.

Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC.– Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. –  Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. – Theorem Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. This communication has not been reviewed for completeness or accuracy, does not necessarily reflect the views of Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and is not a recommendation or endorsement of any product, service, or issuer. Third party posts do not reflect the views of Theorem Wealth Management or Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and have not been reviewed for completeness and accuracy. All further communications from this representative must be sent from and received by johnathan@theoremwm.com. For additional information, please refer to one of the following consumer websites: www.FINRA.org, www.SIPC.org.

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