401(K)s Can Augment Your Retirement Plan

Record Highs in 401(K) Contributions

Retirement accounts in the U.S. reached record highs by the end of 2018’s third quarter. The average account balance was $106,500 for 401(k) plans, and the number of 401(k) millionaires in the U.S. increased to 187,400, up 41 percent from 2017. This trend may continue, because of an increase in 2019 contribution limits. The IRS increased the maximum limit for 401(k), 403(b) and most 457 plans from $18,500 to $19,000. Those who are age 50 or older may contribute an extra “catch-up” amount up to $6,000.1

Advantages of 401(K) Target-Date Funds

Among 401(k) investors, one of the most common trends is the use of target-date funds. These funds are comprised of a mix of stocks and bonds; over time, the portfolio is transferred to a more conservative allocation, as the fund’s target retirement date grows closer. Some say the introduction of these funds has made it easier for investors to utilize an age-appropriate mix of securities, while past investors tended to allocate too much money in high-risk equities.

Recent data shows long-term 401(k) investors are seeing significant rewards. The average balance for 10-year account holders is $305,400, while those saving for 15 years average just over $400,000. 401(k) investors with $1 million or more have generally been saving for 30+ years.2

Most 401(K) Participants Don’t Take Full Advantage of Annual Contributions

This varies based on invome:3

  • Only 4% of savers who earn up to $50,000 a year max out their 401(k) contribution
  • Only 11% of those earning between $50,000 and $100,000
  • Only 32% of those earning $100,000 or more

A 401(K) Can Be a Great Savings Opportunity…

Only 14 percent of U.S. employers offer a 401(k) plan at all.4 If you have the opportunity to benefit from matching employer contributions – don’t waste it! It’s basically free money and one of the fastest ways to catch up on retirement savings.

For Help with Your Retirement Plan – Contact Us Today: (512) 638-9499.

 

Works Cited:
  1. Fox Business. Nov. 1, 2018. “IRS increases retirement contribution limits for 2019.” https://www.foxbusiness.com/features/irs-increases-contribution-limits-for-retirement-accounts. Accessed Dec. 15, 2018.
  2. Kelli B. Grant. CNBC. Nov. 5, 2018. “Ranks of 401(k), IRA millionaires swell as average retirement account balances hit new high.” https://www.cnbc.com/2018/11/05/retirement-savings-balances-hit-new-record-highs.html. Accessed Dec. 15, 2018.
  3. Ben Carlson. Marketwatch, July 29, 2018. “This is what it really takes to become a 401(k) millionaire.” https://www.marketwatch.com/story/this-is-what-it-really-takes-to-become-a-401k-millionaire-2018-07-23. Accessed Dec. 15, 2018.
  4. Sarah O’Brien. CNBC. Jan. 31, 2018. “Trump cites 401(k) gains, yet most workers don’t have one.” https://www.cnbc.com/2018/01/31/trump-cites-401k-gains-in-speech-yet-most-workers-dont-have-one.html. Accessed Dec. 15, 2018.