Will Your 401(k) Meet Your Retirement Goals?

Quick Answer: Discover how your 401(k) can align with your retirement goals. Explore safe money alternatives for a secure future. Learn more at SafeMoney.com.

It’s no surprise as to why. A 401(k) plan offers a number of benefits, including tax-deferred accumulation, a high contribution limit for pre-tax savings, and in many cases an employer match.

As retirement nears for many Americans, it brings up an important question: How will their 401(k) plan prepare them to enjoy a comfortable, meaningful post-work lifestyle?

Even with these benefits, some Americans are dissatisfied with their 401(k) because they perceive shortfalls in other areas. Personal perceptions of there being limited investment options, “low” access to personal financial guidance with some plans, and a lack of money control are just a few investor frustrations.

There is also the issue of subpar financial knowledge. Surveys indicate many people don’t understand 401(k)s, even though these plans dominate the workplace savings landscape.

According to the Investment Company Institute, as of December 31, 2016 Americans held $7 trillion in all employer-based defined-contribution plans. Of this, $4 trillion was in 401(k) plans – or 57.1% of total defined-contribution plan assets.

Lack of Financial Literacy Takes Its Toll

In some ways, investor frustrations with 401(k)s may be traceable to a lack of knowledge. Take, for instance, the findings of the “Wellness in the Workplace” survey from KRC Research. In the study, 88% of Americans understood topics like employer matching.

But in other areas they showed an incredible knowledge gap about their 401(k) plans:

• About 71% of workers failed a basic quiz on 401(k)s and retirement planning, with workers missing at least three out of nine questions
• 76% of workers could not define what a mutual fund is
• 57% of respondents didn’t know what percentage of their salary they had to put away so they could meet their retirement goals
• 66% of Americans could not name the provider managing their retirement plan
• Amazingly, nearly 4 out of 5 workers in small-business settings failed to pass the 401(k)/retirement planning quiz

In turn, the survey suggests this knowledge gap translates into a lack of financial confidence:

• 50% of Americans report they don’t receive any one-on-one help from their 401(k) provider, but an overwhelming majority wishes they did
• 69% are not comfortable with making 401(k) investment choices
• Over 40% worry they will be unable to achieve their retirement goals
• About 25% of those surveyed failed to remember the process they used to select their 401(k) investments

Interestingly, just 16% of workers regularly monitor their 401(k) accounts, and only 12% devote time to retirement planning.

Why are 401(k)s so Dominant?

As mentioned earlier, 401(k) assets accounted for 57.1% of total defined-contribution plan assets at year-end of 2016. So why are 401(k) accounts the most dominant savings vehicle, in spite of the lack of retirement saver awareness of them? One primary reason is the employer-matching incentive tied to many 401(k) plans.

In a 2016 Plan Sponsors Council of America survey, 95.6% of employer-sponsored defined-contribution plans made employer contributions. The survey covered 592 plans, of which 263 were 401(k) only, and 324 had a combined 401(k) and profit sharing structure.

Confidence Begins with Education and Knowing Your Options

It’s clear that Americans are undereducated about their personal finances, including 401(k)s. Alleviating this knowledge gap begins with proper learning and taking time to understand your retirement planning options.

If you are ready to learn more, consider working with a financial professional who understands the unique challenges of retirement — specifically, the money matters of those who are retired or not quite there yet.

You Can Unlock Your 401(k) without Penalty before Age 59.5

Say you are one of the many investors who are dissatisfied with their 401(k). If you are considering a 401(k) rollover, always consider all of your options carefully. In many cases, a rollover decision is irreversible, so it’s important to make sure you take the right course of action – especially with guidance from qualified tax and legal professionals.

With that said, if you are interested in 401(k) rollover options, you may believe you can’t fully access your 401(k) money, penalty-free, until age 59.5. Actually, you can – there are ways to unlock your current 401(k) at any age, with any amount, without any penalty. If it is appropriate for your situation – and we stress that it should be appropriate for your needs, goals, and other conditions – this may be an advanced strategy to consider for your retirement future.

Request a Free Financial Review

At SafeMoney.com, we can connect you with qualified financial professionals who have advanced training in this strategy.Or consider working with a financial professional who can help you prepare for retirement with more financial confidence. They can help you put together your own personal retirement income strategy. Or if you have an existing strategy, a second opinion can help you determine if you can take anymore steps toward your goals.

Use our Find a Financial Professional section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. Should you have any questions or concerns, call 877.476.9723.

Frequently Asked Questions About will your 401 k help you meet your retirement goals

How can I determine if my 401(k) will meet my retirement needs?

To assess whether your 401(k) will meet your retirement needs, start by estimating your retirement expenses and desired lifestyle. Consider factors such as healthcare costs, travel, and daily living expenses. Then, evaluate your current 401(k) balance, expected growth, and any additional income sources, such as Social Security or pensions, to see if they align with your goals.

What are safe money alternatives to consider alongside my 401(k)?

Safe money alternatives include fixed annuities and cash value life insurance, which can provide a guaranteed return and protect your principal. These options can complement your 401(k) by offering stability and predictable income during retirement. It's essential to evaluate your risk tolerance and retirement timeline when considering these alternatives.

Should I roll over my 401(k) into an IRA for retirement?

Rolling over your 401(k) into an IRA can provide you with more investment options and potentially lower fees. An IRA also allows for greater flexibility in choosing safe money alternatives, such as fixed annuities, which can enhance your retirement security. However, consider the pros and cons, including tax implications and withdrawal rules, before making a decision.

How much should I have in my 401(k) by retirement age?

Financial experts often recommend having at least 10 to 12 times your annual salary saved in your 401(k) by retirement age. This amount can vary based on your expected lifestyle, retirement duration, and other income sources. It's crucial to regularly review your savings progress and adjust your contributions to ensure you are on track to meet your retirement goals.

Take the next step, run the numbers with our free retirement calculators.