Are You Ready to Invest Beyond Your 401(k)?

If you’re investing for retirement by regularly contributing to a 401(k) account, you’re already off to a great start to help meet your retirement goals. However, you may wonder if investing in your 401(k) is enough to meet the lifestyle you want in retirement or how you will meet your other financial goals, like buying that lake house you’ve always wanted or saving for the future generations of your family.

Before investing additional income, it’s important to take a close look at these aspects of your finances:

Review Your 401(k) Contributions

A good place to start is by reviewing your 401(k) account and existing contributions. I recommend investing 5-10 percent of your income in your 401(k), especially if you’re just starting out. Setting up automatic contributions out of your paycheck is one way to make this easy and convenient. Additionally, if your employer offers an employer match, you should be investing the maximum amount required to take advantage of the full employer match. If you’re not taking advantage of an employer match, you’re missing out on free money that may help you in retirement! When increasing your 401(k) contributions, it’s important to note that a 401(k) is geared toward retirement and withdrawing funds early for other purposes may come with penalties, so it’s best to leave those funds for retirement only.

Set a Savings Goal

After reviewing your existing 401(k) account, it’s important to take a look at how much you have in your emergency savings fund. According to FNBO’s ‘Savings Survey,’ 63% of American’s do not set savings goals. An ideal goal for your savings fund is to have 3-6 months of living expenses set aside to ensure you’re prepared for an emergency. This means you have enough to cover your essentials, including your bills, groceries, gas, insurance payments, medications and other living expenses. It may seem daunting but it helps if you take it one month at a time. I also recommend practicing these tips to start building your emergency savings fund.

Pay Down Debt

If your emergency savings fund is built up and you still have extra income, you should consider any debts you have before you start investing. If you have credit card debt or student loans, debt reduction should be a priority before investing excess income. Additionally, making regular payments to pay down debt may have a positive impact on your credit rating, which is important if you’re looking to buy a new home or get a new car.

Meet with a Financial Advisor

If you’re contributing to your 401(k), you have an emergency savings fund built up and you’ve paid down your debts, it may be time to meet with a financial advisor to discuss investing additional income. Your financial advisor can review your financial goals to determine which investment strategy is best for you and help you develop a financial plan.

FNBO’s ‘Millennials and Money’ survey found that 70% of millennials are intimidated by investing. If you’ve never invested before and you’re just getting started, you may feel intimidated but you don’t need to be! Your financial advisor is there to help you develop a financial plan and guide you through the process. Plus, when you start investing, your contributions can be as small as $50 a month, which can add up over time. For example, if you invest $50 a month for 30 years with an average of 6% return on investment, you’d have $50,226 (with $32,226 coming from returns)!

If you’re ready to get started, connect with a financial advisor today. They’ll help you get on the path to help meet your financial goals.

About the Author

Stacy joined FNBO in 1999 as an investment officer and is currently a Director with the Investment Management team in the Wealth Management group, overseeing the Client Portfolio Management team. He is responsible for managing the investment portfolios for high net worth clients, institutions, foundations and endowments, along with providing assistance to companies in selecting mutual funds for their retirement plans. He serves on the group's Asset Allocation, Manager Research, and Alternative Investment Committees.