401(k) Planning: What Do You Need to Know?

Preston Rosamond |

By Preston Rosamond

What’s better than a 401(k) when it comes to saving for retirement? You just fill out a form, check a few boxes, pick an investment such as a target-date fund, and you immediately start saving for those golden years (sometimes with an employer match to boot!). Easy, right? 

While it may be fairly simple to sign up for a retirement plan through your employer, some planning tips could make your 401(k) work harder for you. Let’s discuss some of the basics so you can get the most out of your retirement fund.

Investment Choices

Picking the investments in your 401(k) should be a thoughtful process. While target-date funds are quite popular, they may be duplicating your efforts. 

If you decide to split your allocations between a target-date fund and an index fund, for example, you may double your allocation and not know it. You may leave yourself open to overweights in certain industries and sectors and have a completely skewed mix of assets. 

Do some research or have your financial advisor aggregate all the underlying holdings in your 401(k) plans and see where you stand. The results may surprise you. 

Roth 401(k)s

While Roth IRAs put income limits on who can contribute, Roth 401(k)s do not have this limit. The question is do you want to pay taxes now or in the future? If you expect to be in a lower tax bracket at retirement (which isn’t always the case), then the regular 401(k) is the option for you. It’s hard to predict the future, but all your pensions, 401(k)s, and IRAs could add up and put you in a higher tax bracket. And think about your spouse; if you should pass away, they would have to file as a single person, increasing their tax burden. 

If you are just starting out, then presumably you are already in a lower tax bracket, so it may be appropriate for you to contribute to a Roth 401(k)—if your employer offers one. 

Contribution Limits

It’s important to know your limits. For 2021, you can contribute as much as $19,500 ($20,500 for 2022). The total limit for employee and employer contributions is $58,000 ($61,000 for 2022). An additional $6,500 in catch-up contributions is allowed for those over 50 (for 2021 as well as 2022). (1)

Valued Advice From a Trusted Advisor

You’ll need to consider many factors when signing up for your company’s 401(k) plan, and a little extra thought and consideration can make a big difference in your financial future. As with any important financial decision, it’s wise to first consult with an experienced professional.

The Rosamond Financial Group is here to take a look at your options and guide you to make the most of your 401(k). Call my office at 830-798-9400 or email smrosamond@rosamondfinancialgroup.com to schedule a complimentary consultation.

About Preston

Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with nearly two decades of industry experience. He provides comprehensive wealth management and financial services to individuals, professionals, and families who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch, a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing smrosamond@rosamondfinancialgroup.com or schedule a call with our online calendar.


(1) https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits