According a recent Washington Post article, Fidelity Investments had 200,000 participants in the 401(k) programs it managed who had over $1 million saved up at the end of this year’s third quarter. That’s a 4,000 participant increase from the just the previous quarter. These numbers are quite inspirational as they show that it’s far from impossible to save a million dollars for retirement, which seems to be the magic number for the dream retirement these days. However, those retirement accounts didn’t reach seven figures overnight. No, it took years of diligent saving and smart investing. You too can strive to reach that number. With some good investments and maxing out your contributions, you can put yourself on the right track. When it comes to investing, though, you need to make sure that you understand your appetite for risk so as to not jeopardize your savings. Risk can do a number to your account, especially if you don’t know when to minimize it and protect your portfolio. After all, if you’ve saved a million dollars, wouldn’t you want to protect it and ensure it lasts through your retirement. Now, some of you reading this may be nowhere near saving $1,000,000 in their 401(k) and may fear they will never reach that number. That’s ok. The vast majority of retirees will never get anywhere near the $1 million mark, but that doesn’t mean you can’t take steps as though you are aiming for it. For example, just because you weren’t maxing out your 401(k) contributions doesn’t mean you can’t start now. Or, just because you didn’t invest your 401(k) in the stock market doesn’t mean you can’t start now. Again, you don’t have to stash away seven figures in your 401(k) to save as though you are. If you need help with saving for retirement, you should speak with a certified financial planner or wealth manager.
The rules surrounding retirement savings accounts can be complicated. As such, it’s not uncommon for people to make mistakes when it comes to saving for retirement. Luckily, the rulemakers realize this also and allow for corrections of many retirement savings account errors and mistakes. It should be noted however, that many mistakes are not penalty free, regardless of whether you correct the error in a timely fashion or not. However, taking the steps to correct an error can keep those penalties to a minimum and potentially save you thousands of dollars in both taxes and penalty fees. Furthermore, the corrective measures themselves can be complex and confusing, especially if you are not good with taxes. Again, though, putting the time and resources into correcting the error is most likely much more cost efficient than taking the penalty. If you have made an error with your retirement savings (i.e. made an excess IRA contribution) you will want to take steps to correct the error as soon as possible and as efficiently as possible. Your best bet to do so is by speaking with a certified financial planner or–if you already know that the correction will involve a tax hit–a tax professional who can help you properly calculate what the tax will be. This is also another good reason why you want to track your retirement account transactions and check to make sure they were processed within a reasonable time because once an error occurs there is only so much time to correct it before it becomes a costly mistake. If you have questions about your retirement account or think you may have made an error and want to correct it, again, you should speak with a certified financial planner and retirement expert.
If you are early in your career and just starting to think about saving for retirement, don’t forget to consider inflation as you save. The value of the dollar changes over time thanks to inflation, which means that by the time you retire, a dollar may not be as valuable as it was when you first started saving. In other words, you money may not go as far as it once did. Therefore, if you have a ways to go before retirement, you may want to track the value of the dollar over time as well as adjust your retirement savings from time to time to make sure you have enough saved to meet your goals.