You can start investing for retirement as soon as you have earned income. Whether through an IRA, 401(k), or self-employed retirement plan, it's critical to start as early as possible to take full advantage of compounding.

• You can start contributing to a 401(k) or similar employer-sponsored retirement plan as soon as you're eligible, which typically requires meeting age and employment requirements (e.g., 21 years old and 1 to 6 months of service). This is one of the easiest ways to start investing for retirement.

• Your risk tolerance, time horizon, and goals will influence how you allocate your investments. Younger investors can typically afford more exposure to stocks, while those nearing retirement might shift to more conservative investments like bonds.

• If your employer offers a match, it's crucial to contribute at least enough to take full advantage of that match, as it provides an immediate return on your investment.

• You can open an IRA at any time, regardless of employer offerings, as long as you have earned income.

A good rule of thumb is to contribute at least enough to get the full employer match, as this is essentially free money. Many advisors recommend contributing between 10-15% of your salary if possible. If that seems like too much, start smaller and increase contributions by 1% each year. The more you save, the more you benefit from compound growth over time. Contributing more than the employer match can also provide significant tax advantages and help you reach your retirement goals faster.

For 2024, the IRS allows contributions of up to $23,000 if you're under 50, and $30,500 if you're 50 or older (including the $7,500 catch-up contribution). These limits can change annually, so it's essential to check for updates each year. If you can contribute the maximum, it can significantly boost your retirement savings and reduce your taxable income.

A traditional 401(k) allows pre-tax contributions, lowering your taxable income today, but you'll pay taxes on withdrawals in retirement. A Roth 401(k) takes after-tax contributions, meaning your money grows tax-free, and qualified withdrawals are tax-free as well. If you expect your tax rate to be higher in retirement, a Roth may be better. Many people split contributions between the two for tax flexibility in retirement. For example, if you are early in your career and expect your income to rise significantly, a Roth may be more advantageous, while a traditional 401(k) could be better if you are currently in a high tax bracket.

Your 401(k) is one piece of your overall retirement strategy. If you have IRAs, HSAs, or other savings accounts, you’ll want to consider how they complement each other. Diversify across accounts to take advantage of different tax treatments and create a balanced approach to saving for retirement. For instance, combining a 401(k) with a Roth IRA allows you to have both tax-deferred and tax-free income streams in retirement, offering flexibility in managing taxes.

Employer matching varies by company, but a common setup is for the employer to match 50% of contributions up to 6% of your salary. This means if you contribute 6%, your employer adds another 3%, effectively giving you a 9% total contribution. Be sure to understand your company’s matching formula and contribute enough to get the full match. Keep in mind that not all employers offer matching, so confirm the specifics with your HR department to ensure you are maximizing your benefits.

Your asset allocation should reflect your time horizon and risk tolerance. Younger investors can typically afford more risk and may have a higher allocation in stocks for growth potential. Closer to retirement, shifting to a more balanced mix that includes bonds helps reduce risk. Consider using online tools or speaking with a financial advisor to find an allocation that fits your needs. For example, younger investors might choose an 80/20 split between stocks and bonds, while someone nearing retirement might opt for a 50/50 allocation to reduce risk.

Risk tolerance refers to your ability to endure market ups and downs without panicking. If you can withstand market drops and have a long-term investment horizon, you may prefer a more aggressive portfolio. If the idea of losing money makes you anxious, consider a more conservative allocation. Most plans have questionnaires to help you determine your risk tolerance. Additionally, some 401(k) plans provide tools to help assess your comfort level with risk, which can guide your investment choices. We also offer access to an in-depth risk analysis tool that will help you understand your relationship with risk more thoroughly. Contact your plan administrator or financial advisor to get access to this tool.

Target-date funds are designed to simplify investment choices by providing an automatically adjusting asset allocation based on your planned retirement year. As you approach retirement, these funds shift to a more conservative allocation. They can be a good “set-it-and-forget-it” option for those who want simplicity, but they may not offer the customization some prefer. Be aware that target-date funds often come with higher fees compared to other index funds, which can impact your returns over time.

It's advisable to review your 401(k) at least annually or after significant life changes (e.g., marriage, new job, etc.). Rebalancing ensures your portfolio remains aligned with your target asset allocation. Many 401(k) plans offer automatic rebalancing options, which can be set quarterly or annually to maintain your desired mix. Automatic rebalancing can make it easier to keep your investments on track without the need for frequent manual adjustments.

Yes, you can access your 401(k) funds before retirement, but there are specific rules and potential penalties to consider. Generally, early withdrawals before age 59½ are subject to a 10% penalty, plus income taxes. However, there are exceptions, such as hardship withdrawals for medical expenses, educational costs, or buying your first home. Some plans also offer loans, which allow you to borrow from your 401(k) balance. These loans must be repaid with interest, typically within five years, and failure to repay a loan can result in taxes and penalties. Loans can be useful for emergencies, but they reduce your retirement savings and could negatively impact your long-term financial goals. Always weigh the consequences carefully before accessing your 401(k) funds early.

Contributions to a traditional 401(k) are tax-deferred, meaning you don’t pay taxes on them now, lowering your taxable income. You’ll pay taxes when you withdraw funds in retirement. With a Roth 401(k), contributions are made after taxes, but withdrawals in retirement are tax-free, provided certain conditions are met. Both options offer tax-efficient growth, but they differ in when you’ll get the tax break. Traditional 401(k)s are also subject to required minimum distributions (RMDs) starting at age 73, whereas Roth 401(k)s are not, allowing for more flexibility in managing your income during retirement.

You have a few options when leaving a job: leave the funds in your previous employer’s plan, roll over to your new employer’s 401(k), roll over to an IRA, or cash out (which generally incurs taxes and penalties). Rolling over to an IRA or another 401(k) helps keep your retirement savings intact and growing. Rolling over to an IRA often offers more investment choices and greater flexibility compared to keeping funds in an employer-sponsored plan.

Many plans offer auto-enrollment, where you’re automatically enrolled in the 401(k) unless you opt out, and auto-escalation, which automatically increases your contribution rate annually. These features are designed to encourage saving and can make it easier to reach your retirement goals with minimal effort on your part. Opting into auto-escalation can be particularly beneficial, as it allows you to gradually increase your contributions over time without a significant impact on your take-home pay.

Estimating how much you'll need depends on factors like your lifestyle, expected retirement age, and healthcare costs. A common benchmark is to replace 70-80% of your pre-retirement income. Use retirement calculators to gauge how much your 401(k) can provide and whether you'll need additional savings vehicles to meet your goals. Keep in mind that healthcare costs, especially long-term care, can be a significant expense in retirement. Planning specifically for these expenses can help ensure you have enough saved.

Your 401(k) account is held at Charles Schwab, a well-known and reputable financial institution. Charles Schwab has a strong reputation for security and investor protection. The firm uses advanced encryption, multi-factor authentication, and other security measures to protect your account information. Additionally, your 401(k) is protected by federal regulations under the Employee Retirement Income Security Act (ERISA), which ensures that plan assets are held in trust and safeguarded from creditors. Schwab is also a member of the Securities Investor Protection Corporation (SIPC), which provides limited protection for securities in case the brokerage fails. While this does not cover losses from market fluctuations, it does provide added peace of mind regarding the safety and security of your retirement funds.

Yes, if you have a 401(k) balance of $250,000 or more, you may be eligible to upgrade to a full brokerage account. This type of account allows you to invest in individual stocks, bonds, and a wider range of other securities, giving you greater flexibility and control over your investments. With a full brokerage account, you can actively manage your portfolio and make specific investment choices beyond the standard mutual funds typically offered in 401(k) plans. This can be particularly useful if you have specific investment strategies or want more diversified options. However, it's important to note that with increased investment options also comes greater risk, and active management may require more time and expertise.

Contributing to both a traditional and Roth 401(k) provides tax diversification, which can be beneficial when planning for retirement. With a traditional 401(k), you receive a tax break today by contributing pre-tax dollars, which reduces your current taxable income. However, withdrawals in retirement are taxed as ordinary income. With a Roth 401(k), you contribute after-tax dollars, which means you don’t get an immediate tax break, but withdrawals in retirement are tax-free. By contributing to both, you can create flexibility in retirement by having both taxable and tax-free income streams, which may help manage your tax liability depending on future tax rates and your financial needs.

We offer a diverse selection of over 30 investment options, including large cap, small cap, mid- cap, open-ended mutual funds in growth and value, fixed income, lifestyle funds and more. If you do not provide investment directions, your contributions will be defaulted to the SPDR® S&P 500 ETF.

To join the Colmina Enhanced 401k Plan, you must be at least 21 years old and have completed one year of service with at least 1,000 hours of work. You will be eligible to enter the plan on the first day of the first month and seventh month of the plan year following the time you meet the eligibility criteria.