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It turns out that staying on course is profitable.
The spectacular gains have certainly been helped by the overall performance of the market. The S & P 500 grew about 320% over the same period, or 426% including dividends.
"While account balance growth is driven by both market performance and savings, both are critical to achieving long-term retirement savings goals," said Kevin. Barry, president of Workplace Investing, in the report.
Seeing many on your account can be misleading, warned David O. Brien, a financial advisor at EVO Advisers, who helps small businesses manage and develop 401 (k) plans.
"It takes context," said O & # 39; Brien. "Answering the big question of:" Do I contribute enough? And, for millennia, "Do I contribute it in the right tax bag? & # 39; ; "
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Since contributions are paid before taxes, the 401 (k) plans offer the immediate benefit of reducing the amount of income subject to tax.
But you must eventually pay the bond (in this case, the IRS) and the money withdrawn at retirement is taxed at the rate of your regular income, which is currently 37% for the top bracket.
Blair DuQuesnay of Ritholtz Wealth Management in New York suggests equitably dividing retirement savings into three categories. In addition to a 401 (k), duQuesnay customers use an individual Roth retirement account – fed by after-tax dollars, which make tax-free withdrawals at retirement – as well as a brokerage account. "You will have the opportunity to manipulate your taxable income every year of your retirement," she said.
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