In Depth: Employer Sponsored Retirment Plans

 Hey Guys,

I know it's been a while but I am back and ready to break down all of the employer retirement planning options out there!!!!

This blog will always be known for providing out best financial opinion and I always want people to know I am not a financial professional. I simply share this as a black woman because I know for sure a lot of people (particularly black women) are not aware of how to live their best financial life. 

Having a good retirement plan is key, and the earlier you start the better. I am going to break own sponsored work retirement plans as well as solo retirement plans, so sick back and read all you need to know to save, save, save.

EMPLOYER RETIREMENT PLAN: ROTH 401K, 401K

These are by far my favorite because it not only allows you to save but you are getting"free money" from your job (up to a certain match)

• ROTH 401K: A matching ROTH 401K is amazing (well in my opinion) since it is usually for people who believe they will be in a higher tax bracket once they retire and can withdraw tax free. Currently you are allowed to contribute $19,500 per year BUT when you withdraw money you are not taxed and all of that money is yours (If you saved $1Million in a Roth, when you retire you have $1Million to take out non-taxed). Please keep in mind your company match (money your job gives you) will go into a traditional (tax advantaged) 401k, but having close to 20 grand (as of 2020) saved per year is nothing short of amazing. 

Key Take Aways:

• Roth 401k is a tax advantaged retirement account that is employer sponsored
• Contributions and earning are tax free upon withdrawal
• $19,500 is the limit for 2020 and 2021 but if you are over 50 you can contribute $6000 more for a total of $25,500/year
• There are no income limitations to participate in this retirement vehicle

• Traditional 401K: A matching traditional 401K is a goal of many people who are into retirement planning. It is a tax-advantaged employees sponsored retirement vehicle and can be advantageous when filing taxes and all of the money put in is not counted as income. You are taxed when you withdraw in retirement at whatever your tax-bracket is at that time (unlike the roth). Your employer can match some or all of you contribution and many people choose this since this is the main offer at a lot of companies.

Key Take Aways

• Traditional 401K is a tax-advantaged retirement account that is employer sponsored
• Contribution are pre-taxed and you are taxed upon withdrawal
• Due to the 2020 Cares act a lot of withdrawal rules have been relaxed so be sure to check here
• You can contribute $19, 500 for workers under 50 and $26,000 for workers over 50 plus a $6500 catch up as well

PLEASE NOTE:  You cannot contribute to the 401K Roth or Traditional unless you are working. You are required to begin taking a minimum distribution at age 72 and the amount required is on the IRS minimum distribution chart found here.

Please also see the retirement calculator chart below, I love to use the chart here at bankrate.com

Opinion:  So I know a lot of you are wondering I am doing....well I am a BIG ROTH 401K fan. I do know not all companies have this option, but if they do you can surely take advantage of it and use it. I work at Google and they have a lovely retirement program. I max out my ROTH 401K and any extra money goes toward my after-tax account which is them automatically rolled over to my ROTH 401K so I am not taxed. This is immediately done so that my account cannot accrue interest (which is taxed) and can roll over so I can continue being tax-free when I withdraw. I have rolled over previous employer account into my own personal Fidelity account as well. So if you left a job and do not know what to do with that retirement money I highly suggest this option. 

I hope this is helpful and gives you all better insight into your jobs retirement planning programs.

Later!!!!