401k Not Enough For You? Add This

Before I get started, it’s time for my customary beginning-of-the-year nag.

By the time you read this, you will have likely received your first paycheck of 2019. Take a minute to see how much of it you’ve diverted into your 401k plan. Are you on track to contribute the $19,000 for the year? (Or $25,000 if you’re 50 or older?)

If not, take a minute today to log in and increase your contribution levels. The longer you wait, the harder it will be to catch up. So, get it done now, before your next paycheck.

It’s OK if you’re worried about the stock market taking another spill. No one says you have to allocate your 401k to stocks. A money market or stable value fund is a perfectly fine option for now.

It’s simply to get your cash into the account to take advantage of the tax break and any employer matching. The actual investing can happen later.

All right, I got my annual January nag out of my system.

Now, let’s move on to the good stuff.

While the 401k is the backbone of most Americans’ financial plan, if you’re self-employed or a partner in a small business, you have even better options at your disposal. In addition to defined-contribution 401k plan, you can also build yourself a good, old-fashioned defined-benefit pension plan.

I know what your thinking. Words like “defined benefit” or “defined contribution” are enough to make your eyes glaze over. They might even be enough for you to consider the virtues of jabbing an icepick into your temples.

It’s boring. I know.

But hear me out, because if you play your cards right, you can potentially shield hundreds of thousands or dollars from the tax man… every year.

Paying Yourself First

Very few companies offer traditional pension plans today. They’re expensive to administer, they can be a legal minefield, and at the end of the day, no one wants the responsibility of caring for retired workers decades after they’ve quit working.

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Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not ...

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