Broker Check


| March 20, 2017

I was reading an article from CNBC that was like a primer for 401k plans. And it got me thinking about how we save for retirement.

Ok, I’m old! Bear with me while I reminisce about the good ol’ days. (Back then we called them “These Trying Times” but I digress…) When I was starting out with my career, many people I knew, including myself, worked for a company and we had a pension plan. We were told how 40 years from now,  when we retired, we would get a pension that could be as much as 80% of our pre-retirement income. Good News? 80% of pre-retirement income. Bad  News? When I retire in 40 years.

Needless to say, I didn’t think much about this benefit. I was more concerned about how many weeks of vacation I would get!! Well, those 40 years have come and gone, and guess what? NO PENSION PLAN. Yes, my parents got one, but over the years, many companies did away with their pension plans. Sure, if you work for the government, or the State, you still get a pension. However, for the vast majority of us, we were provided with 401k plans as a way to save for retirement. Many companies would match our contributions. In the end, however, it was up to us to make sure we had money to live comfortably during retirement. Folks like me got caught in the middle, losing many years to save. Also we have lived through TWO major market corrections since 2000 that had the potential to devastate our 401k balance.

It always amazes me when I talk to folks how much confusion there is about 401k plans. It can be one of the MOST IMPORTANT asset that aims to help us in retirement, yet we don’t always make the best decisions. Click HERE to see 5 Common Mistakes people make with their 401k plans.

Fred Cook
CAVU Financial, LLC

The article referenced was prepared by a third party and is provided for informational purposes only. It contains references to individuals or entities that are not affiliated with LPL Financial, CAVU Financial, or Stratos Wealth Partners.

The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Contributions to a traditional 401k may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth 401k offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth 401ks. Their tax treatment may change.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

The target date is the approximate date when investors plan to start withdrawing their money. The principal value of a target fund is not guaranteed at any time, including at the target date.

Investing in mutual funds involves risk, including possible loss of principal.