Carl McCall
By Carl McCall
H. Carl McCall served as New York State Comptroller for almost ten years (1993 - 2003) where he managed the pension system for nearly one million New Yorkers, including more than 300,000 retirees. Prior to his election to State Comptroller, McCall was president of the New York City Board of Education. He was also Vice President at Citibank/Citicorp and is a former New York State Senator. McCall serves on the Board of Directors of TYCO International, New Plan Realty, and Ariel Mutual Fund. He is also Chair of the New York State Public Higher Education Conference Board. An ordained minister, McCall received a B.A. degree from Dartmouth College and is the recipient of twelve honorary degrees. He is currently a principal of Convent Capital, LLC, a financial services advisory firm.
Many Americans have the option of planning for retirement by saving at work. One option being offered is the 401(k) plan. If you work for a government or a nonprofit, your plan might be called a 403(b) or a 457. The best way to secure your retirement is to contribute regularly to one of these plans. A 401(k) offers tax incentives to save for your future. Here are the basics to get your 401(k) savings going:
Choose a Plan
Your employer may offer a traditional 401(k) or a Roth 401(k). In a traditional
401(k) plan, you don't pay taxes on the money in the year you put it into
the account. Instead you pay income tax on your contributions and earnings when
you take the money out. In a Roth 401(k), you pay income taxes when you put
money into the account, but you usually won't be taxed on the contributions
or the gains when you withdraw it.
If you are less than 50 years old, you can contribute up to $15,500, depending on your salary and the company's rules. If you're 50 or older, you can make a "catch-up" contribution of an extra $5,000 a year. One of the most appealing features of a 401(k) is the employer match contribution, which is generally cents on the dollar up to a certain percent of your salary. Take advantage of this "free money" by contributing at least enough to your account to get the employer match even if you can't max it out.
Choose and Manage Your Investments Wisely
Investments in a 401(k) can include stocks, bonds and mutual funds selected by
your employer. When planning your investment strategy, consider the following
tips:
- Pay attention to your investment return to ensure your investment is earning money and not losing money
- Diversify your investments to increase chances of owning investments that rise in value and reduce the impact of investments that lose value
- Limit your investment in employer stock so that if the company falls on hard times you limit your possible loss
- Consider a life cycle or target date retirement fund based on your retirement date, as these funds automatically adjust the asset allocation as you approach retirement
- Consider index funds that mimic a group of successful stocks
- Keep fees low by exploring "no load" (no commission charged) funds.
Read your account statements and, if you're concerned that an investment is not doing well, consider making a change. If your plan is doing well, don't touch it. If you change employers, be sure to roll your 401(k) over to your new company's plan or into a new or existing IRA. Taking the money or "cashing out" your 401(k) plan will not only subject you to penalties and taxes on the lump sum, but you will also be missing out on an important opportunity to increase your saving by letting the money compound or grow.
This column is meant to provide general financial information; it is not meant to substitute for, or to supersede, professional or legal advice.
Note: The content in this material is believed to be current as of this printing, but, over time, legislative and regulatory changes, as well as new developments, may date this material.